More Stories

Informist, Monday, Sept. 21, 2026

MUMBAI – Gilt prices and overnight indexed swap rates are expected to track movements in US Treasury yields and crude oil prices at the open on Tuesday. Many traders expect the Reserve Bank of India's Monetary Policy Committee to hike the repo rate by 25 basis points and announce more measures to drain durable liquidity, including expectations of more open market operation sales of INR 250 billion or INR 500 billion. Dealers expect the RBI's rate-setting panel to follow the US Federal Reserve with a 25-bps repo rate hike in October. Traders will focus on the comments from the RBI Governor Sanjay Malhotra, dealers said. 

Some traders expect oil prices to decline in the near term if the war in West Asia does not escalate. Swaps will also track movement in US Treasury yields, with the US yield curve flattening after the US Federal Open Market Committee raised the federal funds target rate for the first time since 2023.

GILTS

Traders expect the 10-year benchmark bond yield to trade in a range of 7.00-7.10% until next month's MPC meeting if crude prices remain at current levels, dealers said. A 25-bps rate hike is already priced into bonds, making for lacklustre trading, dealers said. Some traders find current yields attractive for buying bonds, since the 10-year bond yield is unlikely to sustain a rise above its May high of 7.14%, they said. 

Traders will also track the result of the INR 167.50-billion state bond auction Tuesday, with the notified amount lower than the indicated amount of INR 237 billion, which eased market sentiment Monday.

Traders also await the release of the borrowing calendars for state and central government bond issuances for the next quarter and the second half of the current financial year, respectively. The mix of bond tenures in the calendars will provide cues about the shape of the gilt yield curve, dealers said. Most traders expect little change in the Centre's plan from the Apr-Sept calendar, though bankers have expressed several preferences to the central bank. The RBI has held several meetings with market participants this month to discuss the Centre's borrowing calendar, dealers said. Some expect more supply of seven-year bonds, others of 15-year bonds, and still others of three- to five-year bonds. 

Any significant movement in the rupee and swap rates will also lend cues, dealers said. The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 7.00% and 7.10%, dealers said. The 10-year benchmark 6.94%, 2036 gilt ended at INR 99.23, up from INR 99.10 Friday. The bond's yield fell to 7.0497% from 7.0686% at the end of the previous session.

SWAP RATES

On Tuesday, swap rates are seen tracking overnight movements in crude oil prices and US Treasury yields, dealers said. Traders also expect the OIS curve to flatten, with short-term rates rising on bets of an interest rate hike, dealers said.

Traders also expect the RBI to introduce more measures to drain systemic liquidity, beyond the government bond sales it is conducting and variable rate reverse repo operations, they said. The one-year swap rate is seen in the range of 5.95–6.15% and the five-year at 6.40–6.70%. The one-year swap rate ended at 6.07%, unchanged from Friday. The five-year swap rate ended at 6.54%, down from 6.59% Friday.

CALL

On Tuesday, the one-day call money rate is expected to open above the RBI's repo rate of 5.25%, while the tri-party repo rate is seen near 5.15% after outflows for goods and services tax payments and rising demand for credit ahead of the end of the September quarter. Outflows related to settlement of the central bank's foreign exchange interventions are likely to continue to drain liquidity, dealers said.

The RBI is expected to continue reducing the size of daily VRRR auctions. The RBI will conduct an overnight VRRR of INR 750 billion Tuesday, against the INR-1-trillion auction Monday and the INR-2.25-trillion operation it held Friday. Some market participants expect the RBI to conduct more open-market operations auctions to sell gilts after announcing INR 1 trillion worth of such sales this month. Dealers expect the one-day call rate to be at 4.50–5.40% Tuesday, while the one-day tri-party repo rate is seen at 4.50-5.30%. On Monday, the one-day call rate ended at 5.25%, against 4.90% at Saturday's close for two-day loans.

RBI AUCTION

--RBI to hold overnight VRRR auction for INR 750 bln 0930-1000 IST Tue 

--Seven states to raise INR 167.50 billion via bond sale Tuesday 

LIQUIDITY

Total net outflows of INR 200.63 billion. The calculation does not account for redemptions of the Standing Deposit Facility and scheduled variable rate repo and variable rate reverse repo operations.

* Inflows

--INR 14.62 billion as coupon on state bonds

--INR 34.75 billion as coupon on 2033 floating rate bond 

--INR 750.85 billion as redemption of overnight variable rate reverse repo tender 

* Outflows

--INR 250 billion as payment for RBI gilt sale at OMO auction Monday

End

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

Reported by Kabir Sharma and Cassandra Carvalho

Edited by Saji George Titus

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.