More Stories

Informist, Tuesday, Aug. 12, 2025

MUMBAI – Government bond prices and overnight indexed swaps may take cues from the overnight movement of US Treasury yields after the release of US CPI inflation data for July. US consumer inflation in July was in line with analysts' expectations. The 10-year US Treasury yield was at 4.25% at 1900 IST, against 4.28% at the end of Indian market hours. Consumer prices in the US increased 2.7% on year in July, while core CPI rose 3.1% on year. Consensus estimates from The Wall Street Journal indicated inflation would rise to 2.8% on year in July. 

Traders are assessing whether India's rate-setting panel will reduce the policy repo rate further, with some hopes being diminished after the Reserve Bank of India policy review last week. The RBI's Monetary Policy Committee's unanimous pause on rates and the RBI's forecasts for growth and inflation in the June quarter of 2026 suggest a high bar for rate cuts. On the liquidity front, traders have priced in overnight borrowing rates close to the repo rate. 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% tariff on Indian goods, dealers said. Traders await developments on tariffs and India's response to the US levy, dealers said. Bond and swaps may also track the movement of crude oil prices and the movement of the rupee against the dollar.

GOVERNMENT BONDS

On Wednesday, bond prices may take cues from the overnight movement of US Treasury yields after the release of US CPI inflation data for July. Traders will closely track technical levels on gilts, after the yield on the 10-year benchmark ended at 6.49%, near the psychologically crucial 6.50% level. Some traders expect the fall in prices to have bottomed out, while others see yields rising to 6.53-6.56%. Traders will also position for the weekly gilt auction on Thursday. Traders are also looking forward to next week's auction. The government is scheduled to sell INR 300 billion of a 10-year gilt and INR 60 billion of a three-year gilt next week. 

Any increase in government expenditure to provide support to those impacted by tariffs may weigh on bond prices due to fears of an increase in government borrowing. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.45-6.55%. On Tuesday, the 2035 bond ended at INR 98.83, or 6.49% yield.

OIS RATES

On Wednesday, OIS rates may take cues from the movement in US Treasury yields after the release of US CPI data, dealers said. Near-term swap rates will track the movement of the overnight Mumbai Interbank Outright Rate. 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 Tuesday, the one-year swap ended at 5.51% and the five-year swap ended at 5.67%.

CALL

On Wednesday, the one-day call money rate may open near the RBI's repo rate of 5.50% on demand for funds and low liquidity surplus currently available with banks. During the day, the call rate is seen in a range of 4.70-5.50%, dealers said. On Tuesday, the one-day call rate ended at 5.05%. 

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

LIQUIDITY

--Total net outflows of INR 77.20 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 7.30 billion as coupon on state bonds

* Outflows

--INR 84.50 billion as payment for state bonds

End

Reported by Cassandra Carvalho

Edited by Avishek Dutta

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.