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Informist, Saturday, Nov. 15, 2025

MUMBAI – On Monday, government bond prices and overnight indexed swap rates are likely to track the movement in the US Treasury yields at open, dealers said. Some traders said that gilts could open lower and swaps could open higher after the quantum of gilts purchased by the Reserve Bank of India for the week ended Nov. 7 was less than what some dealers had expected. 

Some traders also expect an India-US trade deal announcement soon, which may dent bond prices and push up swap rates, as it signals a higher growth outlook and reduces the need for open market operations auctions, dealers said. A few traders expect the deal to be finalised over the weekend, though most expect it by the end of the month. Traders will assess the impact of the government's and the RBI's relief measures for exporters announced on Thursday and Friday, respectively. While these announcements suggested a trade deal may not be imminent, a positive for gilts, the RBI's measures may reduce the case for a rate cut, dealers said.

"The more these measures come, the more it seems he's (RBI is) done on the policy front," a dealer at a private-sector bank said.

While several traders expect a rate cut at the monetary policy review in December, some said the RBI Monetary Policy Committee may hold off on rate cuts if GDP growth remains robust, as the inflation trajectory is expected to rise in the next few months. India's GDP data for Jul-Sept is scheduled for Nov. 28, a week before the next policy review. India's GDP likely grew 7.2% in the September quarter, according to India Ratings and Research Pvt. Ltd. Movement in crude oil prices, and the rupee may also influence gilts and swaps.

On Monday, the one-day call money rate may open below the RBI's repo rate due to lack of any major outflows amid ample surplus liquidity in the banking system, dealers said. Most traders expect a variable rate reverse repo auction to be held Monday and will look out for any announcement of the same. Later next week, demand for funds may rise as goods and services tax payment outflows are likely to drain system liquidity, dealers said. During the day, the one-day call money rate is seen in the range of 4.85-5.50%, dealers said.

GOVERNMENT BONDS

On Monday, bond prices may open steady amid a lack of fresh domestic cues, dealers said. A low quantum of net buys from 'others' in the secondary market Friday, the category that includes the Reserve Bank of India, may weigh on gilts. 

Net secondary market purchases by the 'others' segment have been less than INR 15 billion since Wednesday, after averaging around INR 50 billion between Nov. 3 and Tuesday. 'Others' net bought only INR 11.39 billion worth of gilts Friday, according to Clearing Corp. of India data released after market hours. Traders were divided on whether the RBI's secondary market purchases are at an end or would continue, and awaited further clarity at the next monetary policy review in December. 
 

Traders continue to expect the RBI to soon conduct auctions to buy gilts in December to infuse durable liquidity or latest in the March quarter. The fear of additional bond supply for both the Centre and states has receded amid muted borrowing from both entities since the beginning of October, dealers said.

The 10-year benchmark 6.48%, 2035 bond yield is seen in the range of 6.45-6.53% Monday. The yield on the 6.33%, 2035 bond is seen at 6.49-6.56%. The 6.48%, 2035 gilt ended at INR 99.95, or 6.49% yield, while the 6.33%, 2035 bond ended at INR 98.63, or 6.53% yield, Friday.

OIS RATES

On Monday, swap rates are likely to track gilt and US Treasury yields at market open, dealers said. The one-year swap rate is likely to see more of an upward move than the five-year swap, as onshore traders receive fixed rate contracts whenever the five-year swap rate rises as the level is seen to be lucrative due to bets of one more cut in the repo rate this year, dealers said.

Traders will also track systemic liquidity and the overnight Mumbai Interbank Outright Rate, dealers said. Traders may continue to trade in swaps maturing in under a year to adjust their rate-cut bets and bet on spreads between MIBOR and money market rates, dealers said. Swaps may also track the rupee's movement against the dollar and crude oil prices. The one-year swap rate is seen in the range of 5.40-5.55% and the five-year contract is seen at 5.68-5.80%. On Friday, the one-year rate ended at 5.48% and the five-year rate ended at 5.74%.

CALL

On Monday, the one-day call money rate may open below the RBI's repo rate due to lack of any major outflows amid ample surplus liquidity in the banking system, dealers said. Most traders expect a variable rate reverse repo auction to be held Monday and will look out for any announcement of the same. Later next week, demand for funds may rise as goods and services tax payment outflows are likely to drain system liquidity, dealers said. During the day, the one-day call money rate is seen in the range of 4.85-5.50%, dealers said. The redemption of the three-day variable rate reverse repo auction held Friday is due Monday. The two-day call rate ended at 5.00% Saturday.

RBI AUCTION

--Government to switch eight gilts worth INR 250 billion via auction on Monday 

LIQUIDITY

Total net outflows of INR 269.96 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 6.47 billion as coupon on state bonds on Sunday

--INR 3.57 billion as coupon on state bonds on Monday

--INR 573.80 billion as redemption of three-day variable rate reverse repo tender on Monday

* Outflows

--INR 280.00 billion as payment for gilts on Monday

End

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

Reported by Cassandra Carvalho

Edited by Akul Nishant Akhoury

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