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Informist, Saturday, Nov. 1, 2025

 

NEW DELHI – Government bond prices may rise Monday after the state bond auction notified for next week was smaller than indicated and after the Reserve Bank of India rejected all bids for INR 110 billion of the 6.28%, 2032 bond at auction Friday, dealers said. Gilts and overnight indexed swap rates may also take cues from the movement in US Treasury yields at the open Monday.

 

States plan to raise INR 136 billion via bonds Tuesday, against INR 194.50 billion in the indicative calendar for the quarter ending December. Traders are also looking forward to the outcome of the RBI's meetings with primary dealerships on Tuesday and Thursday, dealers said.

 

Progress in trade talks between India and the US are being closely watched for rate cues, with a deal struck before the December meeting of the Monetary Policy Committee seen weakening the case for rate cuts in India. Traders remain uncertain of further rate cuts in India after US President Donald Trump Wednesday said he would do a great trade deal with India. The movement in the rupee against the dollar and crude oil prices may also lend cues, dealers said.

 

The one-day call money rate may open near the repo rate of 5.50% Monday on early demand for funds amid tight liquidity. During the day, the rate is seen in the range of 4.70-5.60%, dealers said.

 

GOVERNMENT BONDS

On Monday, government bond prices may rise after the state bond auction notified for next week was smaller than indicated and after the RBI rejected all bids for INR 110 billion of the 6.28%, 2032 bond at Friday's auction. States plan to raise INR 136 billion via bonds Tuesday, against INR 194.50 billion in the December indicative calendar for the quarter ending December.

 

Traders continue to be uncertain whether the RBI's rate-setting panel will cut the repo rate in December. At the same time, confidence of demand matching supply and the government's fiscal strength have increased after the reduction in bond supply at Friday's auction, dealers said. Traders continue to expect the RBI to soon conduct open market operations to buy gilts, though estimates of the timing of such action vary.

 

Movement in US Treasury yields, crude oil prices, and the rupee may also influence gilts. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.48-6.59%. Meanwhile, the 6.48%, 2035 bond is seen moving in a range of 6.42-6.49% Monday. On Friday, the 6.33%, 2035 bond ended at INR 98.59 or 6.53% yield. The 6.48%, 2035 bond ended at INR 100.06 or 6.47% yield.

 

OIS RATES

On Monday, swap rates may track movement in US Treasury yields. Any sharp movement in government bond yields could also lend cues to swaps, dealers said. Traders will also track developments in India-US trade talks.

 

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 is seen at 5.55-5.74%. On Friday, the one-year swap rate ended at 5.48% and the five-year swap rate ended at 5.67%.

 

CALL

On Monday, the one-day call money rate may open near the RBI's repo rate on demand for funds due to credit disbursement requirements, dealers said. However, rates may fall as liquidity in the banking system is set to improve with inflows due to government's month-end inflows and a cut in cash reserve ratio effective Saturday. 

 

During the day, the rate is seen in the range of 4.70-5.60%, dealers said. On Saturday, the two-day call money rate closed at 5.00%. 

 

RBI AUCTION

--Nil

 

LIQUIDITY

Total net outflows of INR 215.17 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 6.16 billion as coupon on state bonds Sunday

--INR 8.67 billion as coupon on state bonds Monday

 

* Outflows

--INR 230.00 billion as payment for government bond auction Monday

 

End

 

Reported by Aaryan Khanna

Edited by Tanima Banerjee

 

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