More Stories

Informist, Monday, Aug. 25, 2025

 

MUMBAI – On Tuesday, government bond prices and overnight indexed swap rates may take cues from the overnight movement of US Treasury yields at the opening, dealers said. Gilts may also take cues from the results of the INR 341.50-billion state bond auction Tuesday, they said. 

 

Traders' attention is now focused on India's GDP data for Apr-Jun, scheduled to be released at 1600 IST Friday. The data are expected to lend cues to domestic interest rates. According to an Informist Poll of 17 economists, India's GDP is expected to have expanded 6.7% in the first quarter of the financial year 2025-26 (Apr-Mar). In an interview with CNBC-TV18 Thursday, Reserve Bank of India's Monetary Policy Committee member Saugata Bhattacharya also noted that a low GDP deflator may drive up real GDP growth in the June quarter.

 

Tuesday, the one-day call money rate may open near the RBI's repo rate of 5.50% on demand for funds due to outflows for goods and service tax payments.

 

GOVERNMENT BONDS

Tuesday, traders will wait for the results of the state bond auction for further cues to trade, dealers said. Traders will closely track technical levels on gilts. If sentiment worsens and the 10-year benchmark 6.33%, 2035 bond yield tops 6.60%, 6.65-6.66% could be the next psychologically crucial level to watch out for, they said.

 

Prices of longer tenure gilts may fall owing to the heavy supply of state bonds Tuesday and long-term gilts Friday. The government will sell INR 160.00 billion of the 6.68%, 2040 bond, and INR 160.00 billion of the 6.90%, 2065 bond at the auction Friday. Traders fear that state borrowing will increase in the current financial year if the proposed GST reforms are announced by Diwali, dealers said.

 

Traders are also waiting for India's GDP data for Apr-Jun, due Friday, for further cues on domestic interest rates. Most expect the GDP to be around the RBI's forecast of 6.5%. If the growth is below 6.3%, gilt prices could rise, dealers said. According to an Informist Poll, India's GDP is likely to have expanded 6.7% in the first quarter of FY26.

 

On the domestic front, traders await clarity on the impact of the proposed GST reforms on the central government's borrowing and updates on the additional 25% US tariffs that are set to come into effect Wednesday.

 

Bonds may also track the movement of crude oil prices and the rupee against the dollar. The yield on the 10-year benchmark bond is seen at 6.55-6.66%. Monday, the bond ended at INR 98.10 or 6.60% yield.

 

OIS RATES

Tuesday, swap rates will track the movement of US Treasury yields at the opening, dealers said. Swap rates will also track the movement of gilt yields during the day.

 

Volumes may be muted due to the lack of major trading cues until India's GDP data for Apr-Jun are released. US Federal Reserve Chair Jerome Powell's comments provided fleeting relief to Indian swap traders, but for cues on the domestic rate-cut cycle, traders await India's GDP growth print.

 

While India's GST reforms are seen bringing inflation down, the RBI's rate-setting panel 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 remain below the RBI's forecast of 3.1% for FY26 by 20-50 bps, they said.

 

On the global front, investors await the US Personal Income and Outlays for July, due Friday, wherein core inflation is seen at its highest level since late 2023 at 2.9%. Traders also await clarity on the imposition of tariffs by the US on India, especially after Fitch said the tariffs pose a moderate downside risk to India's economic growth. 

 

The one-year swap rate is seen in the range of 5.48-5.60%. The five-year contract is seen at 5.68-5.80%. On Monday, the one-year swap rate ended at 5.52% and the five-year swap rate ended at 5.75%. 

 

CALL

On Tuesday, the one-day call money rate may open near the RBI's repo rate of 5.50% on demand for funds due to GST outflows. During the day, the call rate is seen in the range of 4.70-5.50%, dealers said. On Monday, the one-day call rate ended at 4.95%. 

 

RBI AUCTION

 

--Fifteen states to raise INR 341.50 billion via bond sale at 1030-1130 IST

 

LIQUIDITY

--Total net inflow of INR 35.06 billion scheduled for Tuesday. The calculation of flows does not take into account redemption of the standing deposit facility and scheduled variable rate repo and variable rate reverse repo operations.

 

* Inflows

--INR 9.33 billion as coupon on state bonds

--INR 99.50 billion on redemption of state bonds

 

* Outflows

--Nil

 

End

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

 

Reported by Srijita Bose

Edited by Rajeev Pai

 

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.