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Informist, Wednesday, Sept. 3, 2025

MUMBAI – Gilts may open lower as traders make room for fresh supply ahead of the INR-250-billion weekly gilt auction at 1030-1130 IST, dealers said. Gilts and swaps may also track the overnight movement of US Treasury yields after the release of the US job openings and labour turnover survey for July due at 1930 IST Wednesday, dealers said. 

Traders may also take cues from geopolitical developments, after Goyal said a US-India trade deal was likely by November. Gilt and swaps may also take cues from the movement of the rupee against the dollar and crude oil prices Thursday. Traders may trim any excess positions ahead of the long weekend. The RBI and money markets are shut Friday for Id-E-Milad. In the US, weekly jobless claims for the week ended Saturday are due post market hours Thursday, along with the crucial non-farm payrolls for August on Friday. 

Details of meetings between the RBI and bank treasury officials may lend cues. Traders also await the Goods and Services Tax Council meeting outcome on Thursday for a clearer idea of potential revenue lost by the exchequer from a proposed rationalisation in GST rates.

On Thursday, the four-day call money rate may open near the RBI's repo rate of 5.50% on ahead variable rate reverse repo auction. During the day, the four-day call rate is seen in the range of 4.75-5.50%, dealers said.

GOVERNMENT BONDS

On Thursday, gilts may open lower as traders make room for fresh supply ahead of the INR-250-billion weekly gilt auction at 1030-1130 IST, dealers said. 

The government will sell INR 110 billion of the 6.28%, 2032 gilt and INR 140 billion of the 7.09%, 2074 gilt. Traders are jittery about placing fresh short bets due to the sizeable short sales in the 10-year benchmark 6.33%, 2035 gilt. Demand for the long-term gilt is seen firm from life insurers and provident funds. However, traders are less enthusiastic for the seven-year benchmark gilt as it may face additional share of supply in Oct-Mar, dealers said. The supply of the 50-year bond hitting traders' portfolios in a big way would be a negative for gilt prices.

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. Meanwhile, some banks are also approaching their internal limit on purchasing state bonds, they said. This is likely to increase state bonds' spreads over gilts, with gilt prices largely seen unaffected as state-owned banks are likely to step up purchases of the 10-year benchmark gilt around 6.62% yield.

The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.50-6.62%. The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.48, or a yield of 6.5430% Wednesday.

OIS RATES

On Thursday, swaps will track the movement of gilt yields after the result of the weekly bond auction. Offshore flows due to expectations of a rate cut by the US Federal Open Market Committee at its meeting in September may cap any paying by onshore traders, they said. The one-year swap rate is seen in the range of 5.48-5.60% Thursday. The five-year contract is seen at 5.75-5.85%. The one-year OIS ended at 5.53% Wednesday, while the five-year OIS ended at 5.79%.

CALL

Thursday, the four-day call money rate may open near the RBI's repo rate of 5.50% on ahead VRRR auction. During the day, the four-day call rate is seen in the range of 4.75-5.50%, dealers said. The one-day call rate ended at 5.35% Wednesday.

RBI AUCTION

--Govt to auction two gilts worth INR 250 billion

--RBI to hold eight-day variable rate reverse repo auction for INR 1.5 trillion 0930-1000 IST 

LIQUIDITY

--Total net inflows of INR 103.30 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 135.00 billion on redemption of 91-day T-bills

--INR 137.00 billion on redemption of 182-day T-bills

--INR 73.24 billion on redemption of 364-day T-bills

--INR 16.33 billion as coupon on state bonds

--INR 5.00 billion on redemption of state bonds

--INR 1.38 trillion as reversal of six-day variable rate reverse repo tender

--INR 488.20 billion as reversal of three-day variable rate reverse repo tender

* Outflows

--INR 115.00 billion as payment for 91-day T-bills

--INR 86.00 billion as payment for 182-day T-bills

--INR 62.26 billion as payment for 364-day T-bills

End

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

Reported by Cassandra Carvalho

Edited by Deepshikha Bhardwaj

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