India Money Market Outlook
Call market to begin 10-hour sessions Tue
This story was originally published at 21:35 IST on 30 June 2025
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MUMBAI – The trading period in the call money market is set to be from 0900 IST to 1900 IST starting Tuesday. The Reserve Bank of India had announced Wednesday the increase in timing from the previous eight-hour session. This is seen as a boon for the call money market since banks often have sudden inflows or outflows late in the evening. The move may also decrease their dependence on the RBI's marginal standing facility and standing deposit facility, dealers said.
Tuesday, the one-day call rate may open slightly below the RBI's repo rate due to comfortable liquidity and month-end inflows. During the day, the call rate is seen in a range of 4.90-5.50% and the tri-party repo rate in a range of 4.80-5.30%.
Government bond prices and overnight indexed swap rates may take cues from overnight movement in US Treasury yields, dealers said. The RBI's liquidity management will also be watched keenly after the central bank Friday conducted its first variable rate reverse repo operation since November. Movement in crude oil prices may also lend cues, dealers said.
GOVERNMENT BONDS
Tuesday, bond prices may take cues from overnight movement in US Treasury yields. Traders await comments by US Federal Reserve Chair Jerome Powell, who will join other central bank chiefs at the European Central Bank forum in Sintra, Portugal. Powell's remarks may offer some insight into the US economy and the Fed's monetary policy decisions.
On the domestic front, traders will now watch for any further announcement of variable rate reverse repo auctions by the RBI. Traders are closely tracking overnight borrowing rates, which have risen since Friday's VRRR auction. State-owned banks may purchase gilts for their held-to-maturity books at the start of the Jul-Sept quarter, dealers said.
The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.28-6.35% Tuesday and that on the most-traded 6.79%, 2034 bond is seen at 6.35-6.42%. Monday, the 6.33%, 2035 bond ended at INR 100.03 or 6.32%, while the 6.79%, 2034 bond ended at INR 102.78 or 6.39%.
OIS RATES
Tuesday, swap rates are likely to take cues from the movement in US Treasury yields. The daily fixing of the overnight Mumbai Interbank Offer Rate will also lend cues after the initial hours.
On the global front, Brent crude oil futures for August delivery are expected to stay below $70 a barrel as the conflict between Israel and Iran is seen to be over. Comments from Fed officials on further rate cuts will continue to be tracked closely as expectations of a July rate cut in the US have increased over the past week. Some traders said that if the US Federal Open Market Committee votes to cut rates in July, then the five-year swap rate could also fall by more than 10 bps as domestic rate-cut expectations could resurface.
Swap rates may also track the movement of gilt yields. The one-year swap rate is seen in the range of 5.46-5.60% Tuesday. The five-year contract is seen at 5.62-5.84%. Monday, the one-year swap ended at 5.54% and the five-year swap at 5.71%.
CALL
The one-day call rate may open slightly below the RBI's repo rate Tuesday owing to comfortable liquidity and month-end inflows. During the day, the call rate is seen in a range of 4.90-5.50% and the tri-party repo rate in a range of 4.80-5.30%. Monday the one-day call rate ended at 5.25%, while the tri-party repo rate ended at 5.24%.
RBI AUCTION
--Ten states to raise INR 181.00 billion via bond sale
LIQUIDITY
--Total net inflow of INR 15.08 billion. The calculation of flows does not take into account redemption of the standing deposit facility and scheduled variable rate repo and reverse repo operations.
* Inflows
--INR 5.08 billion as coupon on state bonds
--INR 10.00 billion as redemption of state bonds
* Outflows
--Nil
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Reported by Cassandra Carvalho
Edited by Rajeev Pai
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