More Stories

Informist, Saday, Aug. 29, 2025

 

MUMBAI – Gilts and swap rates may take cues from the movement in US yields on Monday, 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% tariff on Indian goods from Wednesday.

 

Gilt and swaps may also take cues from the movement of the rupee against the dollar and crude oil prices Monday. 

 

India's GDP growth for Apr-Jun was sharply higher than expected at 7.8%, the highest in five quarters. An Informist poll had projected the GDP growth at 6.7%. It was also sharply higher than the RBI's forecast of 6.5%, which dashed any hopes of further rate cuts, dealers had said.

 

GOVERNMENT BONDS

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 

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% Friday 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%.

 

CALL

On Monday, the one-day call money rate may open near the RBI's repo rate of 5.50% on demand for funds from banks. The RBI will hold a three-day variable rate reverse repo auction for INR 500 billion at 0930-1000 IST. During the day, the call rate is seen in a range of 4.90-5.70%, dealers said. The weighted average call rate ended at 4.97% Saturday, against 5.50% Friday.

 

RBI AUCTION

-- To hold three-day variable rate reverse repo auction for INR 500 billion 0930-1000 IST. 

 

LIQUIDITY

--Total net outflows of INR 314.68 billion. 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 723.25 million on Sunday for coupon payment on state bonds.

-- INR 4.59 billion on Monday for coupon payment on state bonds. 

 

* Outflows

-- INR 320 billion as payment for gilts on Monday.

 

End

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

 

Reported by Kabir Sharma

Edited by Deepshikha Bhardwaj

 

 

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.