More Stories

Informist, Friday, Aug. 28, 2026

 

MUMBAI – Gilts and overnight indexed swap rates are not traded on Saturdays. On Monday, government bond prices and overnight indexed swap rates will take cues from developments in the war between the US and Iran and consequent movement in crude oil prices and US Treasury yields at the open, dealers said. The movement in gilt prices may be subdued on caution before the release of India's GDP data for the June quarter. 

 

India's GDP growth is likely to have slowed to a one-year low of 7.2% in Apr-Jun amid supply chain disruption and higher commodity prices stemming from the war in West Asia, according to an Informist Poll of 14 economists. Stronger-than-expected growth may increase bets on a repo rate hike in India as soon as October, while weakness in the economic data may push back rate-hike fears, dealers said. Both instruments remain sensitive to overseas triggers at a time of few interest rate cues domestically. Traders are also tracking how banks will deploy incoming foreign currency non-resident (banks) deposits before the Reserve Bank of India's special scheme on their mobilisation ends on Monday, dealers said.

 

On Saturday, the two-day interbank call money rate is expected to open below the RBI's repo rate of 5.25% due to low demand from banks, dealers said. Most banks have met their funding needs for the weekend on Friday and trade volumes are expected to be low, as is usually the case on Saturdays. Dealers expect the two-day call rate at 4.60–5.25% Saturday. The tri-party repo rate is expected to be in the 4.50–5.20?nd. The weighted average rate in the call market is seen in the 4.90–5.20?nd, and the tri-party repo rate is likely to be 4.75-5.10%, dealers said.

 

GOVERNMENT BONDS

Monday gilt prices are likely to open tracking developments in the war in West Asia and Brent crude oil prices, dealers said. They will also track movements in US Treasury yields, which are pricing in heavy supply along with inflation fears, dealers said. Traders will refrain from aggressive bets ahead of the release of India's June quarter GDP data scheduled at 1600 IST Monday, which is likely to keep trade volume low, dealers said. US Federal Reserve Chair Kevin Warsh's comments at the annual Jackson Hole Economic Policy Symposium after Indian market hours Friday will also guide bond price movements, dealers said.  

 

Traders will also track the result of the INR-300-billion-worth buyback auction. Post-market hours Friday, RBI said the government will buy back INR 300 billion worth of four gilts at a buyback auction Thursday. The bonds included in the buyback are the 7.33%, 2026 bond, the 5.74%, 2026 bond, the 8.15%, 2026 bond, and the 8.24%, 2027 bond. The bonds selected for buyback are the same as bonds selected at the previous buyback auction, which will likely keep the amount of bonds offered at the auction lower than the notified amount, dealers said.     

 

On a longer-term view, expectations of rate hikes in 2026 are seen increasing after the RBI's rate-setting panel focused on the possibility of such hikes at its meeting earlier this month. Some traders expect the yield on the 10-year benchmark bond to rise above 7% in the next few months if the RBI raises repo rates, dealers said. In such a scenario, some traders expect the yield on the 10-year benchmark to halt at 7.20% in the current calendar year.

 

Given the expectation of a rate hike, some traders expect the central bank to announce measures to absorb excess liquidity from the banking system to set the stage for a smooth transmission of rate hikes, dealers said. Such measures may include incremental cash reserve ratio or bond sales through open-market operations. Traders, however, are divided on the usefulness of such measures. Some traders expect such an announcement within the next month. 

 

Traders have pared bets on a steepening of the yield curve after the RBI advanced the closure of foreign currency non-resident (bank) deposits. Traders now expect the curve to flatten. The supply of government securities for the second half of the current financial year will also play a key role in the movement of the yield curve, dealers said. Some traders expect the state government borrowing calendar for the December quarter to be similar in size to the same period last year. 

 

The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 6.85% and 6.93%, dealers said. Any significant movement in the rupee and swap rates will also lend cues, they said. On Friday, the bond ended at INR 100.19, or 6.9108% yield.

 

OIS RATES

Monday, swap rates may take cues from the movement in US Treasury yields after Fed Chair Kevin Warsh's comments at the Jackson Hole symposium Friday, dealers said.

 

The market's assessment of Warsh comments on the US interest rate trajectory may lend direction to pricing of domestic rate hikes as well, which are widely reflected in OIS rates, dealers said. Other developments in the war in West Asia and their impact on crude oil prices may also lend direction to swap rates.

 

After the movement of overseas cues over the weekend, traders will focus on the release of India's GDP for the June quarter at 1600 IST Monday. The one-year swap rate continues to reflect around 100 basis points of repo rate hikes over the next 12 months, dealers said. Monday, the one-year swap rate is seen in the range of 5.82-6.04% and the five-year at 6.30-6.52%. Friday, the one-year OIS rate ended at 5.95% and the five-year rate ended at 6.44%.

 

CALL

On Saturday, the two-day interbank call money rate is expected to open below the RBI's repo rate of 5.25% due to low demand from banks, dealers said. Most banks have met their funding needs for the weekend on Friday and trade volumes are expected to be low, as is usually the case on Saturdays.

 

The RBI will conduct a 15-day VRRR auction for INR 6.00 trillion from 0930 to 1000 IST on Monday. This is the largest VRRR auction the RBI has notified since May 2022. It is also the first time the central bank is conducting a VRRR auction for two weeks or longer since November 2024. A longer tenure drain of frictional liquidity is preferable for banks than the RBI drawing out durable liquidity, dealers said.

 

Dealers expect the two-day call rate at 4.60–5.25% Saturday. The tri-party repo rate is expected to be in the 4.50–5.20?nd. The weighted average rate in the call market is seen in the 4.90–5.20?nd, and the tri-party repo rate is likely to be 4.75-5.10%, dealers said.

 

RBI AUCTION

--RBI to hold 15-day variable rate reverse repo auction for INR 6.00 trillion 0930-1000 IST

 

LIQUIDITY

Total net inflows of INR 11.22 billion. The calculation does not take into account redemption of the Standing Deposit Facility and scheduled variable rate repo and variable rate reverse repo operations.

 

* Inflows

--INR 1.28 billion as coupon on state bonds

--INR 9.93 billion as coupon on state bonds

 

* Outflows

--Nil

 

End

 

US$1 = INR 95.38

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.