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Informist, Thursday, Oct. 23, 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. Any development on a trade deal between India and the US could lead traders to pare back domestic rate-cut bets, they said.

Traders will focus on the US CPI inflation for September due Friday. It could provide cues on the US Federal Reserve's interest rate trajectory, which may have an impact on policy decisions by the Reserve Bank of India's Monetary Policy Committee. With limited economic data from the US due to the partial government shutdown, the delayed CPI print for September could be an important data point for the Federal Open Market Committee to decide whether to cut the interest rate this month. US core CPI is expected to have risen 0.3% in September, according to a Dow Jones poll.

On Friday, the three-day call money rate may open near the RBI's repo rate owing to tight systemic liquidity after goods and serve tax-related outflows, dealers said. Money market rates could ease after the RBI conducts a three-day variable rate repo auction of INR 1.25 trillion at 0930-1000 IST.

GOVERNMENT BONDS

Government bond prices may Friday take cues from the overnight movement of US yields, dealers said. Any further development on a trade deal between India and the US could lead traders to pare back domestic rate-cut bets, they said.

Trade volume may remain low, with some traders likely to be on extended leave. The absence of a gilt auction Friday could prevent a steep fall in prices, dealers said.

Traders will focus on US CPI inflation for September, due Friday, despite a partial government shutdown. Traders may place intraday bets on the same but may choose to trim risks ahead of the weekend, which could lead to a fall in prices close to the end of the day's trade, dealers said.

Traders will also track other offshore triggers ahead of the US FOMC's meeting next week, dealers said. The FOMC is largely expected to cut rates by 25 basis points this month.

Movement of crude oil price may also influence gilts. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.48-6.58%. The 6.48%, 2035 bond is seen moving in a range of 6.42-6.48% Friday.

OIS RATES

On Friday, swaps may take cues from the movement of US Treasury yields and developments on the India-US trade talks. Trading activity may be limited if there are no fresh cues as some traders may remain absent from desks for Diwali, but may be more volatile if further news points emerge, dealers said.

Economists project India's CPI inflation for October 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. A December rate cut was fully priced into the one-year swap rate for several weeks before positivity on the India-US trade talks was seen pushing up growth and weakening the case for policy easing, dealers said.

Some traders were also waiting for the delayed release of the US CPI report for September, now to be released Friday after Indian market hours. There is no immediate data scheduled on the domestic front that is likely to have a significant impact on swap rates, dealers said.

Swaps may also track the movement of the rupee against the dollar and of crude oil prices. The one-year swap rate is seen in the range of 5.38-5.52% and the five-year contract at 5.55-5.74%.

CALL

On Friday, the three-day call money rate may open near the RBI's repo rate owing to tight systemic liquidity after GST-related outflows, dealers said. Money market rates could ease after the RBI conducts a three-day VRR auction of INR 1.25 trillion at 0930-1000 IST Friday. The reversal of the overnight VRR auction held Thursday will drain INR 4.75 billion of liquidity. The RBI's four-day VRR auction conducted Monday is also set to reverse Friday, which will drain INR 1.51 trillion of liquidity from the system.

During the day, the three-day call money rate is seen in the range of 4.90-5.70%, dealers said. On Thursday, the one-day call ended at 5.00%. 

RBI AUCTION

--RBI to hold three-day variable rate repo auction for INR 1.25 trillion 0930-1000 IST 

LIQUIDITY

Total net outflows of INR 344.95 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 5.55 billion as coupon on state bonds

* Outflows

--INR 198.00 billion as payment for 91-day Treasury-bills

--INR 85.00 billion as payment for 182-day T-bills

--INR 67.50 billion as payment for 182-day T-bills

--INR 1.51 trillion as reversal of four-day variable rate repo tender 

--INR 4.75 billion as reversal of overnight variable rate repo tender 

End

US$1 = INR 87.84

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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