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Informist, Tuesday, Sept. 9, 2025

MUMBAI – On Wednesday, bond prices and swap rates will track the overnight movement of US Treasury yields, dealers said. Government data in the US revised down job gains in 2024-25 (Apr-Mar) by 911,000, suggesting labour market weakness was well-entrenched and making the case for the US Federal Open Market Committee to cut rates at its meeting next week.

If US yields are little changed, then bond prices and swap rates may open steady. From a technical perspective, the yield on the 10-year benchmark US Treasury yield is seen rising to 4.10%, a dealer said. Later in the week, traders will track CPI inflation data for August, due Friday. CPI inflation in India likely rose to 2.1% in August from an eight-year low in July because of the fading of the statistical effect of a favourable base and a rise in food and gold prices, according to an Informist Poll.

Details of meetings between the RBI and bank treasury officials may also lend cues. The central bank is likely to meet primary dealerships Wednesday for feedback on the central government's borrowing plan for Oct-Mar, according to dealers. Developments on a potential India-US trade deal will also be watched closely. Bond and swaps may also track the movement of crude oil prices and the rupee against the dollar.

On Wednesday, the one-day call money rate is likely to open below the RBI's repo rate of 5.50% on low funding needs and lack of significant outflows. During the day, the call rate is seen in the range of 4.75-5.50%, dealers said.

GOVERNMENT BONDS

Wednesday, bond prices will track the overnight movement of US Treasury yields at the opening, dealers said. By the end of September, some dealers see the 10-year benchmark gilt yield hitting 6.38-6.40% if the FOMC cuts rates and bets of a cut by the RBI's rate-setting panel in October build up. In the near term, an upside in the yield on the 10-year benchmark gilt could be capped at 6.55%, dealers said. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.42-6.60%. The bond Tuesday closed at INR 98.83, or a yield of 6.4942%.

OIS RATES

On Wednesday, swap rates are likely to track the movement in US Treasury yields after further weakness in the labour market in the world's largest economy, dealers said. A further fall in swap rates is unlikely as a rate cut in the US is expected, but traders remain uncertain of further rate cuts in India. At the same time, offshore traders are likely to continue receiving fixed rates and put downward pressure on swap rates, dealers said. 

The one-year swap rate is seen in the range of 5.42-5.55% Wednesday. The five-year contract is seen at 5.60-5.75%. The one-year OIS ended at 5.48% Tuesday and the five-year OIS ended at 5.70%.

CALL

On Wednesday, the one-day call money rate is likely to open below the RBI's repo rate of 5.50% on low funding needs and lack of significant outflows. During the day, the call rate is seen in the range of 4.75-5.50%, dealers said. On Tuesday, the one-day call money rate ended at 5.00%. 

RBI AUCTION

--RBI to auction 91-day T-bills worth INR 100 billion

--RBI to auction 182-day T-bills worth INR 60 billion

--RBI to auction 364-day T-bills worth INR 50 billion

LIQUIDITY

--Total net outflows of INR 139.13 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 9.87 billion as coupon payment on state bonds

* Outflows

--INR 149.00 billion as payment for state bonds

End

Reported by Cassandra Carvalho

Edited by Deepshikha Bhardwaj

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