More Stories

Informist, Wednesday, Aug. 6, 2025

MUMBAI – Government bond prices are seen opening lower Thursday, as traders are likely to trim portfolios due to lack of firm views on rate cuts in the near term. Reserve Bank of India Governor Sanjay Malhotra gave no indication of quicker rate-cut cycle following the decision of the Monetary Policy Committee on Wednesday to keep rates steady post a three-day meeting. 

Bonds and swaps may also track the movement of US Treasury yields, crude oil prices and the movement of the rupee against the dollar. Post market hours, the White House said it would impose an additional 25% tariff on Indian exports to the US starting Aug. 27. Previously, the US had imposed 25% tariffs on Indian goods along with an additional penalty for importing oil from Russia.

On Thursday, the one-day call money rate may open near the RBI's repo rate of 5.50% on the variable rate reverse repo auction notice. The RBI will hold an overnight variable rate reverse repo auction for INR 500 billion at 0930-1000 IST, Thursday. During the day, the call rate is seen in a range of 4.70-5.50%, dealers said.

GOVERNMENT BONDS

On Thursday, bond prices are likely to open lower as traders are likely to trim portfolios due to a lack of firm views on the rate cuts in the near term. Traders see the yield on the benchmark 10-year 6.33%, 2035 bond hitting 6.45% in the next few trading sessions, after which it could further rise to 6.48%.

Traders will also trim portfolios to make room for fresh stock at the weekly gilt auction Friday. The government will sell INR 110 billion of the 6.28%, 2032 bond and INR 140 billion of the 7.09%, 2074 bond. Due to the sharp rise in yields in the secondary market, demand from insurance companies is seen firm for the 2074 bond as levels are seen to be lucrative to lock in. However, traders will prefer short-term papers maturing in up to 10 years due to the risk of long-term papers. 

Some traders expect the yield curve to steepen due to aversion to long-term papers, while others expect yields across tenures to move in tandem with each other.

The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.38-6.45% and that on the 6.79%, 2034 bond is seen at 6.42-6.50%. On Wednesday, the 2035 gilt ended at INR 99.37 or 6.4162% yield, and the 2034 bond ended at INR 102.11, or 6.4797% yield. 

OIS RATES

On Thursday, OIS rates may open steady after the volatility following the MPC decision, dealers said. Traders may continue to pay fixed rates as they will assess whether the rate-setting panel could reduce rates further this year.

The MPC's unanimous pause on rates and the RBI's forecasts for growth and inflation in the June quarter of 2026-27 (Apr-Mar) suggest a high bar for rate cuts.

However, traders still see the possibility of the panel cutting rates in Oct-Dec if GDP growth surprises by being on the downside, dealers said. Near-term swap rates will track the movement of the overnight Mumbai Interbank Offered Rate, which has been set above 5.40% since Jul. 18.

The one-year swap rate is seen in the range of 5.45-5.56% Thursday. The five-year contract is seen at 5.64-5.76%. On Wednesday, the one-year swap rate ended at 5.51% and the five-year swap rate ended at 5.70%. 

CALL

On Thursday, the one-day call money rate may open near the RBI's repo rate of 5.50% on the variable rate reverse repo auction notice. The RBI will hold an overnight variable rate reverse repo auction for INR 500 billion at 0930-1000 IST, Thursday. During the day, the call rate is seen in a range of 4.70-5.50%, dealers said. On Wednesday, the one-day call rate ended at 4.90%. 

RBI AUCTION

--RBI to auction 91-day T-bills worth INR 100 billion

--RBI to auction 182-day T-bills worth INR 60 billion

--RBI to auction 364-day T-bills worth INR 50 billion

--RBI to hold overnight VRRR auction for INR 500 bln 0930-1000 IST 

LIQUIDITY

--Total net outflows of INR 79.60 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 108.00 billion as redemption of 91-day T-bills

--INR 87.00 billion as redemption of 182-day T-bills

--INR 62.47 billion as redemption of 364-day T-bills

--INR 11.67 billion as coupon on state bonds

* Outflows

--INR 221.62 billion as payment for 91-day T-bills

--INR 77.00 billion as payment for 182-day T-bills

--INR 50.13 billion as payment for 364-day T-bills

End

Reported by Cassandra Carvalho

Edited by Tanima Banerjee

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.