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Informist, Tuesday, Aug. 19, 2025

 

MUMBAI – Government bond yields and overnight interest swap rates may take cues from the overnight movement in US Treasury yields at open on Wednesday. Traders will also await minutes of the Reserve Bank of India's Monetary Policy Committee meeting held earlier in the month, as some traders had expected at least one of the external members of the panel to vote for a rate cut, as opposed to the unanimous vote for status quo in June. The minutes will be released at 1700 IST Wednesday.

 

While the proposed goods and service tax reforms by Prime Minister Narendra Modi are seen reducing inflation, the RBI's MPC is only likely to cut rates if growth takes a hit, dealers said. The GST reforms are seen improving GDP growth, while CPI inflation may be below the RBI's forecast for FY26 by 30-50 basis points. 

 

Traders will watch out for US Federal Reserve Chair Jerome Powell's speech at the Jackson Hole Symposium later in the week for any indication of a rate cut by the US Federal Open Market Committee in September. 

 

On Wednesday, the one-day call money rate may open near the RBI's repo rate of 5.50% on demand for funds ahead of GST outflows.

 

GOVERNMENT BONDS

Traders will closely track technical levels on gilts. If sentiment worsens, the 6.58-6.60% level could be the next psychologically crucial level to watch out for on the 10-year benchmark yield. Traders will take cues from minutes of the MPC's August meeting. 

 

On the policy front, while the goods and services tax reforms are seen moderating inflation, the MPC is only likely to cut rates if growth takes a hit, dealers said. Bonds may also track the movement of crude oil prices, as well as the movement of the rupee against the dollar.

 

The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.48-6.58%. The 2035 bond ended at INR 98.68 or 6.51% on Tuesday. 

 

OIS RATES

Swaps will take cues from the overnight movement in US yields. Traders will also track minutes of the MPC's August meeting for the panel's comments on growth and inflation.

 

Traders await any update on the proposed tax reforms, especially if states approve of the move. 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 5.48-5.60% Wednesday. The five-year contract is seen at 5.68-5.80%. On Tuesday, the one-year swap rate ended at 5.54% and the five-year swap rate ended at 5.74%.

 

CALL

On Wednesday, the one-day call money rate may open near the RBI's repo rate of 5.50% on demand for funds ahead of GST outflows. During the day, the call rate is seen in a range of 4.90-5.70%, dealers said. On Tuesday, the one-day call ended at 5.00%. 

 

RBI AUCTION

--RBI to auction 91-day Treasury-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 158.90 billion scheduled on Wednesday. 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 17.91 billion as coupon on state bonds 

 

* Outflows

--INR 176.00 billion as payment on state bonds 

 

End

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

 

Reported by Gowri Lakshmi

Edited by Avishek Dutta

 

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