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Informist, Friday, Sept. 19, 2025

NEW DELHI – On Saturday, the two-day interbank call money rate is likely to open near the policy repo rate of 5.50% due to demand for funds from banks amid outflows for goods and services tax payments. Volumes may remain low, as is usual on Saturdays, as market participants have already accounted for the outflows this week, dealers said.

During the day, the call rate is seen in a range of 4.75-5.50%, dealers said. On Friday, the three-day call money rate closed at 5.60%. Government bonds and overnight indexed swap rates are not traded on Saturdays.

GOVERNMENT BONDS

On Monday, bonds may take cues from the movement of US Treasury yields, dealers said. With Bloomberg inviting feedback on inclusion of Indian bonds in its flagship Global Aggregate Index, foreign portfolio investors may buy gilts expecting an eventual inclusion, which may lead to rise in bond prices Monday, they said.

Some traders are hopeful of a rate cut by the Reserve Bank of India's Monetary Policy Committee in December due to anticipated rate cuts in the US, which may lead to rise in shorter-tenure bonds. However, traders may refrain from aggressively placing bets with the gilts borrowing calendar for Oct-Mar seen as the next cue for the market. The calendar is expected to be released near the end of the month.

Traders may also take cues from developments on the India-US trade talks after the recent thaw in relations between the two countries. 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 Friday, the benchmark gilt closed at INR 98.87 or 6.49% yield.

OIS RATES

On Monday, swaps may take cues from the movement of US Treasury yields. Traders said there were no scheduled triggers on interest rates in India until the Monetary Policy Committee meeting begins at the end of September, 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 basis points in India. Offshore traders are likely to continue receiving fixed rates and put downward pressure on swap rates, with domestic traders also raising their rate cut bets in the run-up to the domestic policy review, dealers said.

Traders may also take cues from geopolitical developments, especially 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 5.40-5.55% Monday. The five-year contract is seen at 5.62-5.80%. On Friday, the one-year swap rate ended at 5.45% and the five-year swap rate ended at 5.71%. 

RBI AUCTION

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

LIQUIDITY

--Total net inflows of INR 86.77 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 4.55 billion as coupon on state bonds

--INR 45.45 billion as coupon on 7.59%, 2029 gilt

--INR 36.77 billion as coupon on 7.16%, 2050 gilt

* Outflows

--Nil

End

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

Reported by Aaryan Khanna

Edited by Ashish Shirke

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