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Informist, Friday, Aug. 29, 2025

MUMBAI – The two-day call money rate on Saturday may remain below the RBI's repo rate of 5.50% on low demand for funds. As is the case on Saturdays, trading volumes may be muted, dealers said. 

During the day, the two-day call rate is seen in the range of 4.65-5.50%, dealers said. The weighted average call rate ended at 5.50% Friday, compared with 5.46% Thursday. The three-day call money market rate settled at 5.45%, up from the one-day close of 5.00% Thursday.

GOVERNMENT BONDS

Gilts are not traded on Saturdays. On Monday, gilts may take cues from the movement in US yields, dealers said. Any announcement by the RBI that could provide support to gilt prices will also be keenly watched, dealers said. The US Personal Income and Outlays for July, released post-market hours, showed that core inflation rose to its highest level since late 2023, at 2.9%, which may lead to a rise in US yields. Traders also await further developments on US tariffs following the imposition of an additional 25% on Indian goods from Wednesday.

Traders will closely track technical levels on gilts. If sentiment worsens again and the 2035 bond yield tops the 6.65-6.66% level, 6.68-6.70% could be the next psychologically crucial level to watch out for, dealers said. 

Prices of longer tenure gilts may fall as the RBI post-market hours said 12 states will raise INR 316.50 billion through bonds Tuesday. The indicative calendar for state borrowing for Jul-Sept showed states borrowing INR 214.00 billion during the week. There are concerns that state borrowing will increase in the current financial year if the proposed reforms in the goods and services tax are announced by Diwali, dealers said. This could also lead to muted demand by long-term investors in the secondary market, dealers said. 

Bond prices may also track the movement of crude oil prices and the rupee against the dollar. The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.31, or a yield of 6.5678%, against INR 98.55, or 6.5328% yield, Thursday. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.50-6.65%.

OIS RATES 

OIS rates are not traded on Saturdays. On Monday, swap rates will track the movement of US Treasury yields at the open, dealers said. On the domestic front, swap rates will also track the movement of gilt yields during the day after the volatility in the bond market. Short-term swap rates, which still show a likely rate cut in India, are likely to rise after India's GDP growth in the June quarter was 7.8%, sharply above the consensus estimate of 6.7%.

While India's goods and services tax reforms are likely to bring 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 and CPI inflation may be below the RBI's forecast of 3.1% for FY26 by 20-50 bps, they said.

The one-year OIS ended at 5.52% against 5.49% Thursday while the five-year OIS ended at 5.79%, from 5.74% Thursday. The one-year swap rate is seen in the range of 5.40-5.60% Monday. The five-year contract is seen at 5.68-5.83%.

RBI AUCTION

--Nil

LIQUIDITY

--There are no net outflows or inflows scheduled for Saturday. 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

-- Nil

* Outflows

-- Nil

End

Reported by Gowri Lakshmi

Edited by Saji George Titus

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