Sentiment has also weakened since the central bank advanced closure for its discounted swap facility for diaspora deposits.
Indian government bonds are likely to come under strong selling pressure in early deals on Thursday, after the minutes of the central bank’s latest monetary policy meeting signalled the possibility of rate hikes ahead even as interest rates were left unchanged.
The yield on the benchmark 6.94 per cent 2036 bond is expected to trade between 6.80 per cent and 6.85 per cent, a trader with a private bank said, after closing at 6.8170 per cent on Wednesday.
“A gap up opening on the 10-year benchmark bond yield is a very realistic possibility for today, but it would be crucial to see whether the yield crosses the all-important key psychological level of 6.85 per cent on a sustainable basis,” the trader said.
The monetary panel had voted unanimously to keep the policy repo rate unchanged at 5.25 per cent on August 5, while retaining its stance at “neutral”.
While there are limited signs of inflation becoming generalised so far, headline inflation does appear to be normalising “from its benign levels seen hitherto,” RBI chief Sanjay Malhotra said in the minutes.
India’s headline consumer inflation was at 4.45 per cent for July, well within the central bank’s 2-6 per cent tolerance band, with the medium-term target of 4 per cent.
Central bank Deputy Governor Poonam Gupta pointed out that scope for any further policy easing does not exist, and instead “a case for a rate hike may emerge during the course of the (fiscal) year.”
Meanwhile, the benchmark Brent crude contract stayed around $92 per barrel as the deadlock between the US and Iran continued. The price move has stoked inflation worries, prompting markets to expect an increase in borrowing costs.
For India, the world’s third-largest oil importer, higher crude prices threaten the rupee, the country’s inflation trajectory as well as current account and fiscal metrics.
Sentiment has also weakened since the central bank advanced closure for its discounted swap facility for diaspora deposits.
RATES
India’s overnight indexed swap rates are also expected to jump with paying pressure across the curve.
The one-year swap rate ended at 5.8075 per cent, and the two-year rate closed at 6.0475 per cent. The liquid five-year rate settled higher at 6.3975 per cent.
Published on August 20, 2026
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