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Informist, Wednesday, Oct. 8, 2025

 

MUMBAI – Government bond prices and overnight indexed swap rates may take cues from the overnight movement in US Treasury yields at open on Thursday, dealers said. Gilts across tenures may see divergent movement due to different supply pressures, they said.

 

US yields could take cues from the minutes of the Federal Open Market Committee's meeting in September, due later Wednesday, which in turn could lend triggers to domestic gilts Thursday, dealers said.

    

Traders may take cues from any developments regarding US tariffs on Indian goods. Bonds and swap rates may also track the movement of crude oil prices and that of the rupee against the dollar, dealers said. 

 

The one-day call rate may open below the Reserve Bank of India's repo rate on Thursday due to a significant liquidity surplus in the banking system. However, with RBI announcing a INR 500 billion of variable rate reverse repo auction Thursday, rates may rise.

 

GOVERNMENT BONDS

On Thursday, government bonds may take cues from the overnight movement in US Treasury yields. The movement across tenures may be mixed due to different supply pressures, dealers said.

 

While some dealers said the smaller-than-expected state bond borrowing in Oct-Dec could continue to push up prices of longer-tenure bonds, others said the INR 280 billion auction of the 15-year and 40-year benchmark gilts on Friday could limit their rise. The expectation of a steepening in the yield curve due to rate-cut bets in December could lead some traders to buy shorter-tenure bonds, dealers said.

 

Traders expect gilts to continue to rise after the Monetary Policy Committee opened up policy space 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 scheduled Friday and the CPI inflation for September next week for further cues, dealers said.

 

Traders may also take cues from any developments in India-US trade talks. Bond traders may also track the movement of crude oil prices. The movement of the rupee against the dollar could also lend cues to gilts, dealers said. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.45-6.60%. On Wednesday, the 2035 bond ended at INR 98.78, or 6.50% yield. 

 

OIS RATES

On Thursday, swap rates may take cues from the movement of US Treasury yields. 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 space for policy easing, dealers said.

 

On the global front, traders may track developments in the US after the government partially shut down last week. Traders may take cues from geopolitical developments, especially regarding US tariffs on Indian goods.

 

Swaps may also track the movement of the rupee against the dollar, and that of crude oil prices. 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 Wednesday, the one-year swap rate ended at 5.41% and the five-year swap rate ended at 5.62%. 

 

CALL

The one-day call rate may open below the RBI's repo rate on Thursday due to significant liquidity surplus in the banking system. However, with INR 500 billion of variable rate reverse repo auction scheduled Thursday, rates may rise. During the day, the one-day call money rate is seen in the range of 4.75-5.50%, dealers said. On Wednesday, the one-day call rate ended at 4.95%.

 

RBI AUCTION

--RBI to hold overnight VRRR auction for INR 500 billion 0930-1000 IST

 

LIQUIDITY

Total net inflows of INR 3.25 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 148.00 billion on redemption of 91-day Treasury bills

--INR 77.89 billion on redemption of 364-day T-bills

--INR 16.20 billion as coupon on state bonds

--INR 63.90 billion as coupon on 7.10%, 2034 bond

 

* Outflows

--INR 141.00 billion as payment for 91-day T-bills

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

--INR 101.74 billion as payment for 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 Tanima Banerjee

 

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