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Informist, Saturday, Oct. 4, 2025

 

MUMBAI – Government bond prices and overnight indexed swap rates may take cues from the movement in US Treasury yields at open Monday, dealers said. Traders may ramp up bets of a rate cut by the Reserve Bank of India's Monetary Policy Committee in its next policy meet in December, they said.

 

Bets of rate cuts may lead to a further rise in shorter tenure bonds and extend some fall in swap rates Monday. Developments in India-US trade talks may also lend cues. Traders may also track the movement in crude oil prices and take cues from any geopolitical developments. The movement in the rupee against the dollar and US Treasury yields could also lend cues to gilts and swaps, dealers said.

 

On Monday, the one-day call money rate may open near the RBI's repo rate of 5.50% on early demand for funds from primary dealerships and banks. However, rates are seen easing during the day as liquidity in the system is expected to rise.

 

 

GOVERNMENT BONDS

On Monday, government bonds may take cues from the movement in US Treasury yields. 

 

On Friday after market hours, the RBI said states would borrow INR 2.82 trillion through bonds in Oct-Dec. This is lower than expectations of INR 3.2 trillion to INR 3.5 trillion, which could lead to a rise in longer-tenure bonds Monday. However, with expectation of a steepening in the yield curve due to rate cut bets, more traders may prefer shorter-tenure bonds, dealers said. 

 

Traders expect gilts to continue to rise after the RBI's Monetary Policy Committee opened up doors for a rate cut in the future. The 2035 bond yield is seen falling up to 6.40-6.45% levels, but traders will wait for the auction and the CPI inflation for September as the next trigger to take further cues, dealers said.  

 

The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.45-6.60% on Monday. On Friday, the 2035 bond ended at INR 98.72 or 6.51% yield. 

 

OIS RATES

On Monday, swap rates may take cues from the movement of US Treasury yields at open. Traders may continue receiving fixed rates and ramp up bets of one or more rate cuts in December and beyond after the MPC signalled that low inflation had opened up space for policy easing, dealers said.

 

On the global front, traders may track developments in the US after the government partially shut down Wednesday. The one-year swap rate is seen in the range of 5.40-5.50% and the five-year contract at 5.62-5.73%. On Friday, the one-year swap rate ended at 5.43% and the five-year swap rate ended at 5.67%. 

 

CALL

On Monday, the one-day call money rate may open near the RBI's repo rate of 5.50% on early demand for funds from primary dealerships and banks. However, rates are seen easing during the day as liquidity in the system is expected to rise. During the day, the call rate is seen in a range of 4.70-5.50%, dealers said. On Saturday, the two-day call rate ended at 5.00%.

 

RBI AUCTION

--Nil 

 

LIQUIDITY

Total net outflows of INR 231.32 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 8.68 billion as coupon on state bonds on Sunday

--INR 10.67 billion as coupon on floating rate bond on Sunday

--INR 6.86 billion as coupon on state bonds on Monday

--INR 62.47 billion as coupon on 6.79%, 2034 gilt on Monday

 

* Outflows

--INR 320.00 billion on payment for gilts on Monday

 

End

 

Reported by Srijita Bose

Edited by Deepshikha Bhardwaj

 

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