More Stories

Informist, Saturday, Jul. 19, 2025

MUMBAI – On Monday, bonds and swap rates are likely to take cues from the movement of US yields over the weekend, dealers said. Traders expect the US Federal Open Market Committee to hold rates at its meeting on Jul. 29-30.

Gilt traders are also likely to place bets on a rate cut or softer commentary from the Reserve Bank of India at the monetary policy review in early August, dealers said. However, some traders expect the RBI's Monetary Policy Committee to not cut rates further until the US FOMC does so, to protect the interest rate differential between India and the US. It will also wait for any commentary on policy rates from US President Donald Trump and Fed Chair Jerome Powell.

Traders will also track developments around the potential India-US trade deal and the negotiations between the US and other trading partners, dealers said. The impact of an India-US trade deal, or the lack thereof, will be reflected in the movement of the rupee against the dollar, they said. The rupee largely traded below 86 a dollar Friday.

The one-day call rate may open near the repo rate as demand for funds from banks may rise. Payment of goods and services tax is expected to commence Monday and outflows for the same are estimated at INR 1.75 trillion, dealers said.

GOVERNMENT BONDS
Gilts may take cues at the opening Monday from movement in US Treasury yields over the weekend. Traders may build up portfolios betting on a rate cut or softer commentary from the RBI at the monetary policy review in early August, dealers said.

Short-term bonds may remain well-bid after RBI Governor Sanjay Malhotra provided clarity on the central bank's aims of liquidity management and said he would ideally like call money rates to adhere to the policy repo rate of 5.50%, dealers said. The 10-year benchmark 6.33%, 2035 gilt may underperform other gilts during the week ahead of its scheduled auction Friday.

Traders also expect India and the US 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.

Crude oil price movements may also lend cues. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.26-6.34% and that on the most traded 6.79%, 2034 bond is seen at 6.33-6.39%. Friday, the 6.33%, 2035 bond ended at INR 100.16, or 6.31% yield, while the 6.79%, 2034 bond ended at INR 102.96, or 6.36% yield.

OIS RATES
Swaps, too, may track the movement of US Treasury yields, dealers said. Traders expect the US FOMC to hold rates at its meeting at the end of this month. Traders will closely track any comments from President Trump on Fed Chair Powell.

On the domestic front, traders will track overnight borrowing rates and the overnight Mumbai Interbank Offered Rate. Traders do not expect the RBI to announce any further variable rate reverse repo auctions until next Friday as GST outflows are likely to start Monday. They are now pricing in an overnight call money rate of 5.40-5.50%, particularly after RBI Governor Malhotra said the call money rate should be closer to the repo rate. Swaps may track the movement in gilt yields, too.

The one-year swap rate is seen in the range of 5.46-5.60% Monday. The five-year contract is seen at 5.62-5.78%. Friday, the one-year swap ended at 5.50% and the five-year swap at 5.70%.

CALL
The one-day call rate may open near the repo rate on account of demand for funds from banks as outflows for GST payment are expected to begin Monday. During the day, the call rate is seen in the range of 5.00-5.50%, dealers said. Saturday, the two-day call ended at 5.00% against 5.10% Friday for three-day loans.

RBI AUCTION
--RBI: Govt to switch nine gilts worth INR 320.00 bln via auction Monday

LIQUIDITY
--Total net outflows of INR 254.33 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 15.67 billion as coupon on state bonds Monday

* Outflows
--INR 270.00 billion as payment for gilts Monday

End

Reported by Vidhushi RajPurohit

Edited by Nishant Maher

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.