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Informist, Friday, Nov. 7, 2025

NEW DELHI – Government bond prices may open higher Monday on the view that the Reserve Bank of India is buying gilts in a substantial quantum in the secondary market after Clearing Corp. of India data showed large buys from 'others', a segment that includes the central bank, for the fourth straight session. Some dealers said that psychologically crucial levels may be broken, while others said traders would use the opportunity to book profits and limit the rise in prices.

Money markets are shut on Saturday. Overnight indexed swap rates may take cues from the 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 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. The movement in crude oil prices and the rupee may influence gilt prices and swap rates.

On Monday, the one-day call money rate may open below the Reserve Bank of India's repo rate due to comfortable liquidity conditions, dealers said. During the day, the call money rate is seen in the range of 4.90-5.60%, dealers said.

GOVERNMENT BONDS

Gilt prices may open higher Monday on the view that the Reserve Bank of India is buying gilts in the secondary market after Clearing Corp. of India data showed large buys from 'others', a segment that includes the central bank, for the fourth straight session. Some dealers said that psychologically crucial levels may be broken, while others said traders would use the opportunity to book profits and limit the rise in prices.

Net secondary market purchases from the 'others' segment have totalled INR 205.47 billion between Monday and Friday, according to Clearing Corp. of India data, the best four-session stretch since June 2023. Bonds maturing in up to 15 years are seen as the target of these purchases and will be preferred by traders, dealers said.

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 bids worth only INR 210 billion against the notified INR 320 billion at last week's gilt auction, dealers said. Traders continue to expect the RBI to soon conduct auctions to buy gilts, though estimates on the timing of such action vary.

The lower-than-indicated supply of state bonds may also aid gilt prices. Nine states will raise INR 165.60 billion via bonds on Tuesday, the RBI said after market hours Friday, lower than the INR 259.60 billion indicated for the week in the calendar for Oct-Dec.

The yield on the most traded 6.33%, 2035 bond is seen at 6.47-6.55%. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.43-6.50% Monday. The 6.33%, 2035 bond ended at INR 98.71, or 6.51% yield, while the 6.48%, 2035 gilt ended at INR 100.08, or 6.47% yield, Friday.

OIS RATES

On Monday, swap rates are likely to track the movement in gilt yields, dealers said. At open, traders will also track the movement in US Treasury yields over the weekend. Traders will also track developments in the India-US trade talks.

On the data front, traders await domestic October CPI inflation, due Wednesday. Traders have largely priced in a low CPI print, but the impact of the Centre'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.

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 Friday, the one-year swap rate ended at 5.49% and the five-year swap rate ended at 5.71%.

CALL

On Monday, the one-day call money rate may open below the RBI's repo rate due to low demand for funds as the liquidity is in comfortable surplus with no significant outflows, dealers said. Primary dealers may borrow in early trade amid outflows for the INR 320 billion payment for Friday's auction of the 6.48%, 2035 gilt. 

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 three-day call rate ended at 5.40% Friday.

RBI AUCTION

--Nil

LIQUIDITY

Total net inflows of INR 817.01 billion by Monday. 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 14.16 billion as coupon on state bonds Saturday

--INR 6.45 billion as coupon on state bonds Sunday

--INR 981.78 billion as redemption of 5.15%, 2025 gilt Sunday

--INR 25.28 billion as coupon on 5.15%, 2025 gilt Sunday

--INR 38.43 billion as coupon on 7.61%, 2030 gilt Sunday

--INR 22.50 billion as coupon on state bonds Monday

--INR 48.41 billion as coupon on 8.24%, 2033 gilt Monday

* Outflows

--INR 320.00 billion as payment for gilt auction Monday

End

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

Reported by Aaryan Khanna

Edited by Deepshikha Bhardwaj

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