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Informist, Wednesday, Sept. 17, 2025

MUMBAI – Government bond prices and overnight indexed swap rates are seen taking cues from the movement of US Treasury yields after the decision of the Federal Open Market Committee at 2330 IST, dealers said. Traders are waiting for the committee's commentary and any projection of rate cuts during the rest of the year. 

The CME FedWatch tool shows a 94% chance of a 25 basis points cut and nearly 6% chance of a 50 bps rate cut. Back home, traders are uncertain about a rate cut in India but may ramp up bets if they see a consistent US rate cut cycle, which could open up room for the Reserve Bank of India's Monetary Policy Committee to also cut rates in October or December.

Traders may also take cues from developments on India-US trade deal after a thaw in relations between the two countries. Bonds and swaps may also track the movement of crude oil prices and rupee against the dollar.

On Thursday, the one-day call money rate is likely to open below the RBI's repo rate on low demand from banks.

GOVERNMENT BONDS

On Thursday, bonds may take cues from the overnight movement in US yields, dealers said. Traders are waiting for the US FOMC decision to bet on further rate cuts in the US and in India later in the year.

If the FOMC decides to keep rates unchanged or sees fewer cuts during the rest of the year, then bond prices may fall during the day. Some expect the yield on the 10-year benchmark to rise near 6.55% in case of "hawkish" commentary by the FOMC. By the end of September, some dealers expect the 10-year benchmark gilt yield to fall below 6.40% if the FOMC hints at further rate cuts.

Some traders, especially those from primary dealerships, are likely to place fresh short bets ahead of the gilt auction Friday, dealers said. The government will sell INR 300 billion of the 10-year 2035 bond on Friday.

Bond traders 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 6.40-6.55%. On Wednesday, the 2035 bond ended at INR 98.98 or 6.47% yield.

OIS RATES

Thursday, swaps may take cues from the rate decision, commentary, and outlook of the FOMC, dealers said. The US rate-setting panel is universally expected to cut its policy rate by at least 25 bps.

Offshore traders are likely to continue receiving fixed rates and put downward pressure on swap rates, dealers said. Recent positive comments on a trade deal between and US and India augur well for swap rates to shed some risk premium due to the tariffs while also attracting more offshore traders, dealers said.

The one-year swap rate is seen in the range of 5.35-5.55% Thursday. The five-year contract is seen at 5.60-5.76%. On Wednesday, the one-year swap rate ended at 5.46% and the five-year swap rate ended at 5.69%. 

CALL

On Thursday, the one-day call money rate is likely to open below the RBI's repo rate on low demand from banks. During the day, the call rate is seen in the range of 4.75-5.50%, dealers said. On Wednesday, the one-day call rate ended at 5.00%. 

RBI AUCTION

--Nil

LIQUIDITY

--Total net outflows of INR 181.16 billion. The calculation of flows does not take into account redemption of the standing deposit facility and scheduled variable rate repo and VRRR operations.

* Inflows

--INR 153.00 billion as coupon on redemption of 91-day Treasury-bills

--INR 236.47 billion as coupon on redemption of 182-day T-bills

--INR 15.24 billion as coupon on state bonds

* Outflows

--INR 100.00 billion as payment on 91-day T-bills

--INR 60.00 billion as payment on 182-day T-bills

--INR 50.00 billion as payment on 364-day T-bills

End

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

Reported by Srijita Bose

Edited by Ashish Shirke

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