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Informist, Thursday, Nov. 6, 2025

NEW DELHI – Government bond prices may open higher Friday on view that the Reserve Bank of India is buying gilts in the secondary market this week after Clearing Corp. of India data showed large buys from 'others', a segment that includes the central bank, for the third straight day. After the initial reaction, the result of the INR-320-billion auction for the 6.48%, 2035 gilt will lend cues, dealers said.

Overnight indexed swap rates may take cues from the overnight movement in US Treasury yields. Dealers are also tracking developments in the talks between India and the US for a trade deal. Any progress in the talks may weigh on rate cut hopes but any reports of a delay in the final announcement of the deal may support bond prices and pull down OIS rates, dealers said. US President Donald Trump said last week he was ready for a trade deal with India.

On the data front, traders await domestic CPI inflation for October, due on Wednesday. Traders have largely priced in a low CPI print but the impact of the government's cut in goods and services tax rates, which took effect on Sept. 22, is yet to be ascertained, dealers said. GDP growth data for Jul-Sept, due on Nov. 28, will also be tracked.

There is no immediate domestic data scheduled that is likely to have a significant impact the market, dealers said. The movement in the US Treasury yields, crude oil prices, and the rupee may influence gilt prices and swap rates.

On Friday, the three-day call money rate may open near the Reserve Bank of India's repo rate due to early demand for funds from primary dealerships, dealers said. During the day, the call money rate is seen in the range of 4.90-5.60%, dealers said.

GOVERNMENT BONDS

On Friday, government bond prices may open higher as data after market hours showed 'others', a category which includes the RBI, were the top net buyers for the third straight session Thursday. The net purchases by the 'Others' category this week may signal the RBI is buying bonds in the secondary market at a consistent pace for the first time since January, dealers said.

Net secondary market purchases from the 'others' segment have totalled INR 142 billion between Monday and Thursday, according to Clearing Corp. of India data. Bonds maturing in up to 15 years are seen as the target of these purchases and will be preferred by traders, dealers said. This is also likely to help the INR-320-billion supply of the 6.48%, 2035 bond at auction sail through.

Traders remain uncertain whether the RBI's Monetary Policy Committee will cut the repo rate in December. At the same time, confidence in demand matching supply and the government's fiscal strength has increased after the RBI accepted only bids worth only INR 210 billion against the notified INR 320 billion at last week's gilt auction, dealers said. In addition to the speculated secondary market purchases this week, traders expect the RBI will soon conduct auctions to buy gilts, though estimates on the timing of such action vary.

The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.47-6.57%. The 6.48%, 2035 bond is seen in a range of 6.42-6.52% Friday. The 6.33%, 2035 bond ended at INR 98.71, or 6.52% yield, while the 6.48%, 2035 gilt ended at INR 100.12, or 6.46% yield, Thursday.

OIS RATES

On Friday, swap rates may track the movement of US Treasury yields at open. 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.

Swaps may also track the rupee's movement 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 Thursday, the one-year swap rate ended at 5.49% and the five-year swap rate ended at 5.71%.

CALL

The three-day call money rate may open near the RBI's repo rate Friday due to early demand for funds from primary dealerships, dealers said. Scheduled outflows of around INR 600 billion for tax payments may prevent the weighted average triparty repo rate from falling below the Standing Deposit Facility rate.

During the day, the call money rate is seen in the range of 4.90-5.60%, dealers said. Activity by banks and mutual funds in initial public offerings may lead to volatility in money-market rates, dealers said. The one-day call rate ended at 4.95% Thursday.

RBI AUCTION

--Govt to sell 6.48%, 2035 gilt worth INR 320 billion 1030-1130 IST

LIQUIDITY

Total net outflows of INR 240.27 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 23.58 billion as coupon on state bonds

* Outflows

--INR 126.89 billion as payment for 91-day Treasury bills

--INR 70.00 billion as payment for 182-day Treasury bills

--INR 66.97 billion as payment for 364-day Treasury bills

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Aaryan Khanna

Edited by Akul Nishant Akhoury

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