India Money Market Outlook
Gilts, swaps make take cues from US yields Tue
This story was originally published at 22:34 IST on 27 October 2025
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NEW DELHI – When the markets open Tuesday, government bond prices and overnight indexed swap rates may take cues from the overnight movement of US Treasury yields. US yields are being closely tracked as the US Federal Open Market Committee's two-day meeting gets underway Tuesday.
Later in the day, gilt prices may take direction from the result of the INR 178 billion auction of state bonds. The auction size is smaller than the INR 309 billion mentioned for this week in the indicative state bond calendar for Oct-Dec, which may aid gilt prices at the open, dealers said.
Developments in trade talks between India and the US are closely eyed for rate cues, with a deal struck before the December meeting of the Reserve Bank of India's Monetary Policy Committee seen weakening the case for rate cuts in India. The movement of the rupee against the dollar and crude oil prices may also lend cues, dealers said.
On Tuesday, the one-day call money rate may open at or above the RBI's repo rate owing to tight systemic liquidity, dealers said. During the day, the rate is seen in a range of 4.90-5.70%, dealers said.
GOVERNMENT BONDS
On Tuesday, government bond prices may take cues from overnight movement of US yields, dealers said. The result of the INR 178-billion state bond auction at 1030-1130 IST may lend direction to gilt prices in the second half.
Dealers are closely tracking developments related to a trade deal between India and the US and the outcome of the US Federal Open Market Committee's meeting on Wednesday for rate cues. Progress in trade talks may weigh on gilt prices, but any reports on a delay in the final announcement such as on Friday may aid bonds. Expectations of a deeper rate cut cycle in the US may aid bets for a December rate cut by the Monetary Policy Committee and push up gilts, dealers said.
The yield on the 10-year benchmark 6.33%, 2035 bond is Tuesday seen at 6.48-6.58%. The 6.48%, 2035 bond is seen moving in a range of 6.43-6.50%. On Monday, the 6.33%, 2035 bond ended at INR 98.48 or 6.55% yield. The 6.48%, 2035 bond ended at INR 100.08 or 6.47%.
OIS RATES
On Tuesday, swap rates may track the movement of US Treasury yields. Investors await the US Federal Reserve's monetary policy decision this week. The Fed is expected to cut its policy rate by 25 basis points.
There is no immediate data scheduled on the domestic front that is likely to have a significant impact on swap rates, dealers said. 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 Monday, the one-year swap rate ended at 5.47% and the five-year swap rate ended at 5.66%.
CALL
On Tuesday, the one-day call money rate may open at or above 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 1.50 trillion at 0930-1000 IST. The reversal of the two overnight variable rate repo auctions held Monday will drain INR 1.02 trillion of liquidity.
During the day, the rate is seen in a range of 4.90-5.70%, dealers said. On Monday, the one-day call rate ended at 4.95%.
RBI AUCTION
--RBI to hold overnight variable rate repo auction for INR 1.50 trillion 0930-1000 IST
--Nine states to raise INR 178 billion via bond sale 1030-1130 IST
LIQUIDITY
Total net inflows of INR 106.75 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 9.25 billion as coupon on state bonds
--INR 97.50 billion on redemption of state bonds
* Outflows
--INR 1.00 trillion as reversal of overnight variable rate repo tender
--INR 17.88 billion as reversal of overnight variable rate repo tender
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Reported by Aaryan Khanna
Edited by Ashish Shirke
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