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Informist, Thursday, Sept. 18, 2025

MUMBAI – On Friday, government bond prices and overnight indexed swap rates may take cues from the overnight movement of US Treasury yields, dealers said. Gilt traders are likely to take cues from the results of INR 360-billion auction Friday.

US weekly initial jobless claims fell sharply from the previous week and were lower than estimated, which led the 10-year US yield to climb to 4.13% from 4.07% at 1700 IST. Initial jobless claims for the week ended Saturday fell to 231,000 from 264,000 the previous week, dropping the most in almost four years. This reversed an unusually large jump in the prior week and was consistent with low levels of layoffs in the US economy.

Back home, traders remain uncertain about further rate cuts in India after the US Federal Open Market Committee Wednesday signalled it would take a slow and steady path to rate cuts. Traders may also take cues from developments on the India-US trade talks after the recent thaw in relations between the two countries. Bonds and swaps may also track the movement of crude oil prices and the rupee against the dollar.

On Friday, the three-day call money rate is likely to open near the Reserve Bank of India's repo rate ahead of the six-day, INR 1 trillion variable rate repo auction.

GOVERNMENT BONDS

On Friday, bond prices may take cues from the overnight movement of US yields, dealers said. Gilts may trade in a thin range before the result of INR 360-billion gilt auction, they said.

The government will sell INR 300 billion of the 10-year benchmark 6.33%, 2035 bond and INR 60 billion of the 5.91%, 2028 gilt on Friday. Demand for the 10-year bond is expected to be modest, as it is widely viewed as the final auction of the bond. Demand for the three-year bond is expected to be firm from asset-liability managers of banks and mutual funds, dealers said.

Demand at the auction is seen mixed and its result will provide cues to the market, dealers said. Traders could place short bets ahead of the auction, which could drag gilt prices down, they said. Traders will wait for the comments of Reserve Bank of India Governor Sanjay Malhotra at the 25th anniversary of Clearing Corp. of India Ltd. at 1700 IST on Friday.

Traders may also take cues from developments on the India-US trade talks, crude oil prices, and rupee. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.47-6.56%. On Thursday, the 2035 bond ended at INR 98.69 or 6.51% yield.

OIS RATES

On Friday, swaps may take cues from the overnight movement in US Treasury yields, which rose after Indian market hours, dealers said.

Traders remain uncertain about further rate cuts in India after the US FOMC signalled it would take a slow and steady path to rate cuts, though OIS rates are pricing in a December rate cut of 25 bps in India. Offshore traders are likely to continue receiving fixed rates and put downward pressure on swap rates, dealers said.

Traders may also take cues from developments on US tariffs on Indian goods. Recent positive comments on a trade deal and a thaw signalled by the leaders of the two countries augur well for swap rates to shed some risk premium due to the tariffs while also attracting more offshore traders, 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 5.45-5.55% Friday. The five-year contract is seen at 5.65-5.80%. On Thursday, the one-year swap rate ended at 5.47% and the five-year swap rate ended at 5.72%. 

CALL

On Friday, the three-day call money rate is likely to open near the RBI's repo rate ahead of the VRR auction. During the day, the call rate is seen in the range of 4.80-5.75%, dealers said. On Thursday, the one-day call rate ended at 4.95%.

RBI AUCTION

--RBI to hold six-day VRR auction for INR 1.00 trillion at 0930-1000 IST 

--Government to auction two gilts worth INR 360 billion at 1030 to 1130 IST

LIQUIDITY

--Total net inflows of INR 131.63 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 22.20 billion as coupon on state bonds

--INR 50.71 billion as coupon on 7.88%, 2030 gilt

--INR 58.72 billion as coupon on 7.40%, 2062 gilt

* Outflows

--INR 5.85 billion on reversal of three-day variable rate repo auction

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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