India Money Market Outlook
Gilts, swaps to track US ylds post Powell speech
This story was originally published at 20:48 IST on 14 October 2025
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MUMBAI – Government bond prices and overnight indexed swap rates Wednesday will track the overnight movement of US Treasury yields after a keynote speech by US Federal Reserve Chair Jerome Powell, ahead of the US Federal Open Market Committee's meeting at the end of the month, dealers said.
Traders may track developments in the US after the government's partial shutdown. Traders may take cues from geopolitical developments, especially on India-US trade talks. Gilts and swaps may also track the movement of the rupee against the dollar and crude oil prices.
On the domestic front, traders will position ahead of the release of the minutes of the Monetary Policy Committee's Sept. 29-Oct. 1 meeting, due post-market hours Wednesday. Traders will closely track comments of Reserve Bank of India Governor Sanjay Malhotra after the governor said on Oct. 1 that there is space to ease policy further.
On Wednesday, the one-day call rate may open at the RBI's repo rate owing to demand for funds from banks early in the trade.
GOVERNMENT BONDS
On Wednesday, government bonds may take cues from the overnight movement of US Treasury yields after Powell's speech. The 6.48%, 2035 bond yield is seen falling to 6.40% before the next policy review in December, dealers said. Later in the week, traders will realign portfolios ahead of the weekly gilt auction Friday.
The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.46-6.55%. On Tuesday, the 6.33%, 2035 bond ended at INR 98.76 or 6.51% yield. The newly-issued 6.48%, 2035 bond ended at INR 100.26, or a yield of 6.44%.
OIS RATES
On Wednesday, OIS rates may take cues from the movement of US Treasury yields in early Asian trade. Traders may avoid aggressive bets before the minutes of the Monetary Policy Committee's Sept. 29-Oct. 1 meeting are released at 1700 IST Wednesday, dealers said.
Traders may continue receiving fixed rates and ramp up bets of one or more rate cuts in December and beyond after the Monetary Policy Committee signalled that low inflation had opened space for policy easing, dealers said. These bets got a fillip after CPI inflation fell to an over-eight-year low of 1.54% in September from 2.07% in August. Economists project October CPI inflation at less than 1%, the lowest in the current series with 2012 as the base year. This is likely to put pressure on the Monetary Policy Committee to ease rates further, though a December rate cut is fully priced into the one-year swap rate for the past several weeks, dealers said.
The one-year swap rate is seen in the range of 5.38-5.48% and the five-year contract at 5.55-5.66%. On Tuesday, the one-year swap rate ended at 5.43% and the five-year swap rate ended at 5.60%.
CALL
On Wednesday, the one-day call rate may open at the RBI's repo rate owing to demand for funds from banks in early trade. During the day, the one-day call money rate is seen in the range of 4.90-5.60%, dealers said. On Tuesday, the one-day call rate ended at 5.40%.
RBI AUCTION
--RBI to auction 91-day T-bills worth INR 70 billion
--RBI to auction 182-day T-bills worth INR 60 billion
--RBI to auction 364-day T-bills worth INR 60 billion
LIQUIDITY
Total net outflows of INR 111.67 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 16.33 billion as coupon on state bonds
* Outflows
--INR 128.00 billion as payment for state bonds
End
Reported by Cassandra Carvalho
Edited by Ashish Shirke
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