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Informist, Friday, Sept. 5, 2025

MUMBAI – On Saturday, the three-day call money rate will likely open below the Reserve Bank of India's repo rate of 5.50% because of low funding needs. The RBI and money markets are shut Monday, as the holiday for Id-e-Milad was rescheduled from Friday. As is the case on Saturdays, trading volumes may be muted, and may be all the more so because of the long weekend. During the day, the call rate is seen in a range of 4.65-5.50%, dealers said. The four-day call rate ended at 5.10% Friday.

Government bonds and overnight indexed swaps are not traded Saturdays.

GOVERNMENT BONDS

The RBI and money markets are shut Monday, as the holiday for Id-e-Milad was rescheduled from Friday. On Tuesday, bond prices will track the movement of US Treasury yields after US non-farm payrolls for August showed a rise of 22,000 in August, sharply lower than estimates of 75,000.

Later in the day, traders will track the state bond auction result. Seven states will raise INR 153.00 billion at Tuesday's auction. This is slightly higher than the indicated amount of INR 151.50 billion. Later in the week, traders will track August CPI inflation data.

Details of meetings between the RBI and bank treasury officials may lend cues. Developments on a potential India-US bilateral trade deal will also be watched closely. Bond prices may also track the movement of crude oil prices and the rupee against the dollar. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.42-6.60%. The bond Friday closed at INR 99.03, or a yield of 6.4651%.

OIS RATES

Money markets will remain shut on Monday for Id-e-Milad, following Maharashtra government's notification. On Tuesday, swap rates will likely fall sharply, tracking US Treasury yields after the non-farm payrolls data, dealers said.

The data showed US only added 22,000 jobs in August, well below the consensus estimate of 75,000 job additions. The unemployment rate rose to 4.3% from 4.2% in July. In view of the data, the US Federal Open Market Committee is expected to cut policy rates by at least 25 basis points later this month, with 12.0% of the market expecting a 50-bps cut, according to the CME FedWatch tool. The 10-year US Treasury yield fell below 4.07% at 1840 IST for the first time since early April.

Traders may also take cues from geopolitical developments, especially on US-imposed tariffs on India. Lack of domestic cues on interest rates may keep some traders on the sidelines, dealers said.

Swaps may also track the movement of crude oil prices and the rupee against the dollar. The one-year swap rate is seen in the range of 5.42-5.55% Tuesday. The five-year contract is seen at 5.60-5.75%. The one-year OIS ended at 5.49% Friday and the five-year OIS ended at 5.72%.

RBI AUCTION

--Nil 

LIQUIDITY

--Total net inflows of INR 36.93 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 18.54 billion as coupon on state bonds

--INR 18.39 billion as coupon on 6.97%, 2026 gilt

* Outflows

--Nil

End

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

Reported by Cassandra Carvalho

Edited by Ashish Shirke

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