More Stories

Informist, Thursday, Jul. 10, 2025

MUMBAI – Government bond prices may open lower and overnight indexed swap rates are seen higher Friday after the Reserve Bank of India announced, post-market hours, that it would conduct a seven-day variable rate reverse repo auction of INR 2.50 trillion. This is higher than the INR 2.00 trillion that traders had anticipated, and may drive up overnight money market rates further, dealers said. The central bank said it will not conduct the 14-day main liquidity operation Friday for the next fortnight, on a review of evolving liquidity conditions.

On Friday, the three-day call rate may open near the RBI's repo rate due to variable rate reverse repo and fortnight requirements, dealers said. During the day, the call rate is seen in a range of 4.85-5.50% and the tri-party repo rate in a range of 4.80-5.40%.

On the global front, the movement in US Treasury yields after weekly jobless claims data and crude oil prices may lend cues, though the impact would be limited due to the VRRR announcement and the weekly gilt auction, dealers said. 

Updates on a preliminary US-India trade deal before US President Donald Trump's tariffs are implemented Aug. 1 will be closely tracked, they said. Traders expect the US and India to strike a preliminary trade deal soon. This is likely to help the rupee appreciate and also result in some foreign portfolio investment inflows into both equities and fixed-income, dealers said. 

GOVERNMENT BONDS

Bond prices may open lower Friday after the RBI announced, post-market hours, that it would conduct a seven-day VRRR auction of INR 2.50 trillion. Bonds may also fall ahead of the INR-250-billion weekly gilt auction at 1030-1130 IST, dealers said.

The government will sell INR 110 billion of a new seven-year paper and INR 140 billion of the 7.09%, 2074 bond. The seven-year gilt is seen attracting good demand, particularly from state-owned banks for both their trading books and asset-liability management, dealers said. However, demand from long-term investors for the 50-year bond is not seen as robust and investors may demand higher returns to pick up the bond at auction. The bond's closing yield on Thursday, at 7.15%, was cited as lucrative by some life insurers. 

The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.30-6.37% Friday and that on the most-traded 6.79%, 2034 bond is seen at 6.36-6.42%. Thursday, the 6.33%, 2035 bond ended at INR 100.09, or 6.32%, while the 6.79%, 2034 bond ended at INR 102.81, or 6.38%.

OIS RATES

Friday, swap rates are likely to open higher after the RBI announced a seven-day VRRR auction for a higher-than-expected quantum of INR 2.5 trillion to be held Friday. Traders will closely track overnight borrowing rates, which are expected to rise after the announcement. The overnight Mumbai Interbank Offer Rate fixing will also lend cues after the initial trading hours. 

Swaps may also take cues from the movement in US yields. Swap traders will also closely track the movement of gilt yields after the results of the auction of gilts worth INR 250 billion, especially the cut-off on the long-term paper. Demand for the bond for forward rate agreements might push up swap rates as banks would want to hedge their agreements with insurers, dealers said. 

The one-year swap rate is seen in the range of 5.46-5.60% Friday. The five-year contract is seen at 5.62-5.78%. Thursday, the one-year swap ended at 5.52% and the five-year swap at 5.69%.

CALL

On Friday, the three-day call rate may open near the RBI's repo rate due to variable rate reverse repo and fortnight requirements, dealers said. During the day, the call rate is seen in a range of 4.85-5.50% and the tri-party repo rate in a range of 4.80-5.40%. Thursday, the one-day call money rate ended at 4.90%, while the tri-party repo rate ended at 5.20%.

RBI AUCTION

--Govt to auction two gilts worth INR 250 billion at 1030-1130 IST.

--RBI to hold 7-day VRRR auction for INR 2.50 trillion at 1000-1030 IST 

LIQUIDITY

--Total net inflows of INR 152.92 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 110.00 billion as redemption of 91-day Treasury bills

--INR 34.45 billion as coupon on 5.22%, 2025 gilt

--INR 8.47 billion as coupon on state bonds

--INR 1.00 trillion as reversal of seven-day variable rate reverse repo auction

--INR 973.15 billion as reversal of two-day variable rate reverse repo auction

* Outflows

--Nil

End

Reported by 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. 2025. All rights reserved.