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Informist, Friday, Jul. 25, 2025

MUMBAI – Money markets are shut Saturday. On Monday, government bond prices and overnight indexed swap rates are likely to take cues from movement in US Treasury yields, dealers said. 

Traders await the outcome of the US Federal Open Market Committee's meeting next week. They expect the FOMC to hold rates at this meeting. Some believe the Reserve Bank of India's rate-setting panel will not cut rates further until the FOMC does so, to protect the interest rate differential between the two countries. Monday, traders may continue to trim their bond holdings after comments from RBI Governor Sanjay Malhotra on Friday were not seen indicating immediate rate cuts.

Traders will also track developments in the India-US trade talks and the negotiations between the US and other trading partners, especially after Trump has announced deals with multiple countries before the Aug. 1 deadline, dealers said.

On Monday, the one-day call rate is likely to open below the RBI's repo rate on lack of major outflows.

GOVERNMENT BONDS

Gilts are not traded Saturday. On Monday, traders may continue to trim their bond holdings after comments from RBI Governor Sanjay Malhotra on Friday were not seen indicating immediate rate cuts. Gilts are also likely to take cues from movement in US Treasury yields. 

Traders will also watch out for any further liquidity management operations by the RBI. Malhotra had said he would like the call money rates to adhere to the policy repo rate of 5.50%. Prices of extreme shorter-tenure bonds may be supported after the RBI announced INR-300-billion buyback auction Thursday, dealers said. 

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 equities as well as 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 6.28-6.37% and that on the most traded 6.79%, 2034 bond is seen at 6.33-6.42%. On Friday, the 2035 bond ended at INR 99.84, or 6.35% yield, while the 2034 bond ended at INR 102.66, or 6.40% yield.

OIS RATES

Swaps are not traded Saturday. On Monday, they may track the movement in US Treasury yields. Traders don't see any significant cues on domestic interest rates before the RBI's rate-setting panel's next meeting in early August. Near-term swap rates may take cues from the movement in overnight MIBOR, which is expected to remain in the 5.30-5.40% band, dealers said.

Traders await the outcome of the US Federal Open Market Committee's meeting next week. They expect the FOMC to hold rates at this meeting. Some believe the RBI's rate-setting panel will not cut rates further until the FOMC does so, to protect the interest rate differential between the two countries.

Swap traders will also track developments in the India-US trade talks and the negotiations between the US and other trading partners, especially after Trump has announced deals with multiple countries before the Aug. 1 deadline, dealers said. The one-year swap rate is seen in the range of 5.42-5.55% Thursday. The five-year contract is seen at 5.62-5.78%. On Friday, the one-year swap ended at 5.53% and the five-year swap ended at 5.73%.

CALL

Money markets are shut on Saturday. On Monday, the one-day call rate is likely to open below the RBI's repo rate on lack of major outflows. During the day, the call rate is seen in a range of 4.80-5.50% and the triparty repo rate in a range of 4.90-5.55%. On Friday, the three-day call ended at 5.00%. 

RBI AUCTION

--Nil

LIQUIDITY

--Total net outflows of INR 304.28 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 17.06 billion as coupon on state bonds Saturday

--INR 10.34 billion as coupon on state bonds Sunday

--INR 2.84 billion as coupon on 6.64%, 2027 bond Sunday

--INR 2.92 trillion as coupon on 6.79%, 2029 bond Sunday

--INR 22.57 billion as coupon on state bonds Monday

* Outflows

--INR 360.00 billion on payment for gilts Monday

End

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

Reported by Srijita Bose

Edited by Akul Nishant Akhoury

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