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Informist, Friday, Aug. 8, 2025

 

MUMBAI – On Monday, government bond prices and overnight indexed swap rates are likely to take cues from tariff-related news, geopolitical developments, and movement in US Treasury yields, dealers said. Traders will also closely track the movement in crude oil prices and the movement of the rupee against the dollar. Market participants will also closely watch developments related to India's response to the US tariff announcements. Money markets are shut Saturday.

 

Post market hours, Prime Minister Narendra Modi said he had a detailed conversation with Russian President Vladimir Putin on deepening bilateral ties. Trump on Wednesday had announced a 25?ditional tariff on India for New Delhi's continued purchase of crude oil from Russia, effective Aug. 27. 

 

On the policy front, the Reserve Bank of India's Monetary Policy Committee's unanimous pause on rates and the RBI's forecasts for growth and inflation for the June quarter of 2026 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 on the downside, particularly with the US imposing a cumulative 50% tariffs on imports from India, dealers said. Traders are assessing whether the rate-setting panel will reduce the policy repo rate further, with the next key data point being the July CPI inflation print, released Tuesday.

 

On the liquidity front, traders have priced in overnight borrowing rates close to the repo rate. Near-term swap rates will track the movement of the overnight Mumbai Interbank Outright Rate.

 

The call money market is shut Saturday. On Monday, the one-day call money rate may open below the RBI's repo rate of 5.50% due to ample liquidity in the banking system. During the day, the call rate is seen in a range of 4.70-5.50%, dealers said.

 

GOVERNMENT BONDS

Gilts are not traded on Saturdays. On Monday, bond prices may take cues from geopolitical developments and the movement in US Treasury yields. Traders said bond prices could recover slightly after the sharp, unprecedented fall on Friday. Several traders still prefer building portfolios in the 10-year benchmark gilt, due to its liquidity in secondary market trade and expectations that the yield will fall to 6.35% gradually.

 

Traders may also take cues from the state bond auction size. Post-market hours, the RBI said six states will raise INR 84.50 billion through the sale of bonds on Tuesday. The indicative calendar for state borrowing for Jul-Sept showed eight states would borrow INR 147.00 billion on Tuesday.

 

The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.35-6.50% and that on the 6.79%, 2034 bond is seen at 6.43-6.55%. On Friday, the 2035 bond ended at INR 99.40, or 6.41% yield, while the 2034 bond ended at INR 102.02, or 6.49% yield.

 

OIS RATES

OIS rates are not traded on Saturdays. On Monday, OIS rates may open steady as traders are likely to keep to the sidelines, awaiting fresh rate cues. The one-year swap rate is seen in the range of 5.45-5.56% Friday. The five-year contract is seen at 5.64-5.76%. On Friday, the one-year swap ended at 5.51% and the five-year swap ended at 5.67%.

 

CALL

The call money market is shut Saturday. On Monday, the one-day call money rate may open below the RBI's repo rate of 5.50% due to ample liquidity in the banking system. During the day, the call rate is seen in a range of 4.70-5.50%, dealers said. On Friday, the three-day call ended at 4.95%. 

 

RBI AUCTION

--Nil

 

LIQUIDITY

--Total net outflows of INR 76.42 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 23.54 billion as coupon on state bonds Saturday

--INR 9.73 billion as coupon on state bonds Sunday

--INR 43.30 billion as coupon on 7.50%, 2034 bond Sunday

--INR 24.85 billion as coupon state bonds Monday

--INR 72.16 billion as coupon on 7.18%, 2033 bond Monday

--INR 130.45 billion as reversal of 3-day VRRR auction Monday

 

* Outflows

-- INR 250.00 billion as payment for gilts Monday 

End

 

Reported by Gowri Lakshmi

Edited by Tanima Banerjee

 

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