More Stories

Informist, Saturday, Jul. 4, 2026

 

MUMBAI – Government bond prices and overnight indexed swap rates are expected to track the movement in US Treasury yields in early Asian trade and movement in crude oil prices, dealers said. 

 

Traders will also track the inclusion of gilts in Bloomberg's flagship Global Aggregate Index and most remain optimistic that Indian sovereign bonds will be added to the index. If the inclusion proceeds, they expect India's Fully Accessible Route bonds to account for 0.8-1.0% of the index. Bloomberg had said in its September consultation note that a weight of 0.7% was under consideration.

 

Traders are also likely to remain cautious ahead of the release of India's June inflation data, dealers said. Deficient rainfall and higher food prices are expected to push up retail inflation in the coming months, while the RBI is likely to drain systemic liquidity ahead of a likely rate hike cycle, dealers said. A higher-than-expected inflation data will lead to a fall in bond prices and a rise in swap rates. However, traders do not expect a rate hike until October after assessing recent commentary from the Reserve Bank of India officials, dealers said. 

 

Meanwhile, the one-day interbank call money rate is likely to open above the RBI's repo rate of 5.25% due to early demand for funds from primary dealers and some banks, dealers said. The settlement of government bonds worth INR 340 billion, sold at Friday's gilt auction and payment scheduled for Monday, is expected to drain liquidity from the banking system.

 

GOVERNMENT BONDS

On Monday, bond prices will track overnight movement in US Treasury yields and any significant movement in Brent crude oil prices, dealers said. 

 

US Treasury yields are likely to open lower in early Asian trade after the monthly US jobs report for June, released after Indian market hours on Thursday, showed job gains were lower than expected. US markets are closed on Friday.

 

Traders await the release of India's June inflation data, which is expected to be on the higher side, reflecting the rise in energy prices, the dealer said. CPI inflation for June data will be detailed on Jul. 13. On Friday, the 10-year benchmark 6.94%, 2036 bond ended at INR 101.62 or 6.7108% yield.  

 

OIS RATES

Monday, swap rates are seen tracking the movement of US Treasury yields in early Asian trade. Swap rates will also track the movement of crude oil prices. Traders also expect overnight rates to ease due to a liquidity boost from expected inflows into foreign currency non-resident bank deposits.

 

The movement of the rupee could also lend cues. The one-year swap rate is seen in the range of 5.60-5.90% and the five-year at 6.10-6.30%. Friday, the one-year swap rate closed at 5.78% and the five-year swap rate ended at 6.18%. 

 

CALL

On Monday, the one-day interbank call money rate is likely to open above the RBI's repo rate of 5.25% due to early demand for funds from primary dealers and some banks, dealers said. The settlement of government bonds worth INR 340 billion, sold at Friday's gilt auction and payment scheduled for Monday, is expected to drain liquidity from the banking system. In addition, outflows related to excise duty and tax deducted at source payments due on Tuesday are likely to withdraw another INR 500 billion to INR 600 billion from the banking system, further tightening liquidity in the banking system. 

 

However, liquidity conditions are expected to improve later in the week as the maturity of the 8.33%, 2026 government bond, with an outstanding amount of over INR 310 billion, is scheduled for Thursday and will add liquidity to the banking system. 

 

The RBI's measure to provide transient liquidity through three-day variable rate repo auction scheduled Monday between 0930 IST to 1000 IST for INR 750 billion is likely to keep the call rate at or below the RBI's repo rate, later in the day. Subscription at the auction will depend upon the overnight market rates during that time. If the tri-party repo rate remains below the RBI's repo of 5.25%, dealers expect the auction to be poorly subscribed. Earlier this month, the central bank had infused INR 296.95 billion through a two-day VRR auction Wednesday. Saturday, two-day call settled at 4.85%. 

 

RBI AUCTION

--RBI to conduct three-day, INR-750-billion variable rate repo auction 0930-1000 IST

 

LIQUIDITY

Total net outflow of INR 316.57 billion. The calculation of flows does not take into account redemption of the standing deposit facility and scheduled variable rate repo and variable rate reverse repo operations.

 

* Inflows

--INR 13.47 billion as coupon on state bonds

--INR 10.96 billion as coupon on state bonds

 

* Outflows

--INR 340.00 billion as payment for gilts

 

End

 

US$1 = INR 95.21

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Janwee Prajapati

Edited by Deepshikha Bhardwaj

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.