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Informist, Monday, Aug. 10, 2026

 

MUMBAI – Government bond prices and overnight indexed swap rates will take cues from developments in West Asia and their impact on crude oil prices. The market will also take cues from movements in US Treasury yields, dealers said.

 

Traders also await commentary from the RBI governor at the Financial Institution Benchmarking and Calibration conference on Tuesday. However, most traders expect his remarks to align with his policy statement last week. The governor may offer clarity on the timeline of the FCNR(B) deposit facility following the report of premature closure of the deposit window, some traders said. 

 

Dealers also await the release of CPI inflation data for July, both in India and in the US, on Wednesday, for clues on the interest rate trajectory in the two economies, dealers said. India's headline inflation is seen unchanged on month at 4.4% in July, according to the median of an Informist poll of 12 economists. CPI inflation in the US is seen rising 3.4% on year in July, as per a survey compiled by The Wall Street Journal.

 

CALL

On Tuesday, the one-day interbank call money rate is seen below the RBI's repo rate of 5.25% in spite of the three-day VRRR amid ample surplus liquidity. Some banks may have low cash in hand due to a slew of initial public offerings, dealers said. Traders will also track remarks by RBI Governor Sanjay Malhotra at the Financial Institution Benchmarking and Calibration Conference organised by the Federation of Indian Chambers of Commerce and Industry and Indian Banks' Association Tuesday. Most expect his remarks to align with his policy statement last week. The governor could perhaps offer clarity on the timeline of the FCNR(B) deposit facility, after traders largely dismissed a report by the Financial Express Monday that stated the facility could be closed earlier than the Sept. 30 deadline, dealers said.

 

Liquidity is seen remaining comfortable due to inflows from foreign currency non-resident (bank) deposits, at least until outflows for goods and services tax begin in the latter half of the month, dealers said. Core systemic liquidity surplus could hit INR 9 trillion if inflows from FCNR(B) deposits continue to grow at a robust pace. Dealers expect the one-day call rate at 4.60–5.25% Tuesday. The one-day tri-party repo rate is expected to be in the 4.60–5.15?nd. The weighted average call rate is expected to be in the 5.05–5.25?nd and the tri-party repo rate is likely to be 4.90-5.15%, dealers said.

 

GOVERNMENT BONDS

Gilt prices may take direction from developments in the war in West Asia and their impact on crude oil prices and US Treasury yields, dealers said. The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 6.72% and 6.80% Tuesday, dealers said. Any significant movement in the rupee and swap rates will also lend cues, dealers said. 

 

Traders will also track the result of the auction of state government securities Tuesday, they said. A total of six states will raise INR 153 billion through the sale of bonds Tuesday with Punjab having the option to retain additional subscription of up to INR 5 billion in its 17-year bond through a greenshoe option, the RBI had said Friday. The auction will take place between 1030 IST and 1130 IST. A higher-than-expected cut-off yield at the auction may put pressure on government bond prices, dealers said. 

 

On Monday, the 10-year benchmark 6.94%, 2036 bond ended at INR 101.23, similar to the closing level of Friday. Its yield settled at 6.7643%, largely unchanged from Friday. 

 

OIS RATES

Swap rates will track the overnight movement of crude oil prices and US Treasury yields, dealers said. Traders will also track remarks by RBI Governor Malhotra at the Financial Institution Benchmarking and Calibration Conference organised by the Federation of Indian Chambers of Commerce and Industry and Indian Banks' Association. Most expect his remarks to align with his policy statement last week. The governor could perhaps offer clarity on the timeline of the FCNR(B) deposit facility, after traders largely dismissed a report by the Financial Express Monday that stated the facility could be closed earlier than the Sept. 30 deadline, dealers said.

 

Some foreign banks are still seen receiving fixed rates due to foreign inflows through FCNR(B) deposits, dealers said. The movement of the rupee and overnight borrowing rates will also lend cues. The one-year swap rate is seen in the range of 5.65-6.10% and the five-year at 6.12-6.40%.

 

On Monday, the one-year swap rate closed at 5.78%, marginally higher than 5.77% Friday. The five-year swap rate settled at 6.26%, the same as in the previous session.

 

RBI AUCTION

--6 states to raise INR 153 bln via bond sale

 

LIQUIDITY

Total net outflows of INR 257.23 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 16.74 billion as coupon on state bonds

--INR 46.03 million as coupon on 7.50%, 2034 bond

 

* Outflows

--INR 320.00 billion as payment for gilts

 

End

 

US$1 = INR 95.30

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

 

Reported by Kabir Sharma 

Edited by Avishek Dutta

 

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