India Money Market Outlook
Gilts, swaps seen taking cues from US yields Mon
This story was originally published at 22:15 IST on 24 October 2025
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MUMBAI – Government bond prices and overnight indexed swap rates are likely to take cues from the movement of US Treasury yields on Monday, dealers said. Money markets are shut on Saturday. Any development on a trade deal between India and the US could lead traders to pare domestic rate-cut bets, dealers said.
Data released after market hours showed US CPI inflation rose 3.0% on year in September, slightly lower than 3.1% estimated by a Wall Street Journal poll, and up from 2.9% in August. Core inflation also rose 3.0% against expectations of 3.1%. The print boosted the case for a rate cut by the US Federal Open Market Committee at the end of the month, with Fed fund futures largely pricing in a 25 basis-point cut at the meeting.
Movement of crude oil prices may also influence gilts and swaps. Any sharp movement of the rupee against the dollar could also lend cues to gilts and swaps, dealers said.
On Monday, the one-day call money rate may open near the Reserve Bank of India's repo rate owing to tight systemic liquidity, dealers said.
GOVERNMENT BONDS
On Monday, government bond prices may take cues from movement of US 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 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 bps this month.
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% Monday. On Friday, the 6.33%, 2035 bond ended at INR 98.57 or 6.53% yield. The 6.48%, 2035 bond ended at INR 100.12 or 6.46%.
OIS RATES
On Monday, swaps may track the movement of US Treasury yields after the US CPI data for September was released post market hours Friday.
Traders will also track developments in India-US trade talks. Trading activity is expected to increase as several traders may return to their trading desks by Monday after having been on leave for Diwali, dealers said.
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%. On Friday, the one-year swap rate ended at 5.46% and the five-year swap rate ended at 5.65%.
CALL
Monday, the one-day call money rate may open near the RBI's repo rate owing to tight systemic liquidity, dealers said. Money market rates could ease after the RBI conducts a variable rate repo auction of INR 1.00 trillion at 0930-1000 IST. The reversal of the three-day variable rate repo auction held Friday will drain INR 307.50 billion of liquidity.
During the day, the rate is seen in a range of 4.90-5.70%, dealers said. On Friday, the three-day call rate ended at 5.72%.
RBI AUCTION
--RBI to hold overnight variable rate repo auction for INR 1 trillion 0930-1000 IST Monday
LIQUIDITY
Total net inflows of INR 920.92 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 22.48 billion as coupon on state bonds on Saturday
--INR 8.34 billion as coupon on state bonds on Sunday
--INR 38.97 billion as coupon on 7.72%, 2055 gilt on Sunday
--INR 9.30 billion as coupon on state bonds on Monday
--INR 13.00 billion on redemption of state bonds on Monday
* Outflows
--INR 307.50 billion as reversal of three-day variable rate repo tender on Monday
End
US$1 = INR 87.85
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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