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Informist, Monday, Nov. 17, 2025

MUMBAI – On Tuesday, government bond prices and overnight indexed swap rates are likely to open steady due to lack of fresh cues on interest rates, dealers said. Movement in US Treasury yields, crude oil prices, and the rupee may also influence gilts and swaps. The delayed US jobs report for September is due Thursday.

Some traders expect a trade deal between India and the US to be announced 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. While several traders expect the Reserve Bank of India's Monetary Policy Committee to cut the policy rate in its meeting in December, some said the committee may hold off the rate cut 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 on 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.

On Tuesday, 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. Several traders expect a variable rate reverse repo auction to be held Tuesday and will look out for any announcement on the same. Later in the week, demand for funds may rise as outflows for goods and services tax payments are likely to drain liquidity from the banking system, dealers said. During the day, the one-day call money rate is seen in a range of 4.85-5.50%, dealers said.

GOVERNMENT BONDS

On Tuesday, bond prices may open steady due to lack of fresh domestic cues, dealers said. Traders will track net purchases and sales in the secondary market Monday from the 'Others' segment, the category that includes the RBI. 'Others' net bought gilts worth INR 21.05 billion Monday.

Traders may also track the result of the INR-136-billion state bond auction Tuesday, which is smaller than the INR 214 billion indicated in the calendar for state borrowing for Oct-Dec.

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

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.45-6.53% Tuesday. The yield on the 6.33%, 2035 bond is seen at 6.49-6.56%. The 6.48%, 2035 gilt Monday ended at INR 99.86, or 6.50% yield, while the 6.33%, 2035 bond ended at INR 98.51, or 6.54% yield.

OIS RATES

On Tuesday, swap rates are likely to track gilt and US Treasury yields when the market opens, dealers said. There are no domestic cues on interest rates that may limit the movement of swap rates.

Offshore traders may continue unwinding their received fixed rate positions, dealers said. Meanwhile, corporate houses are likely to receive swap rates of up to two years, as has been seen since last week. This is likely because a large corporate house is switching its interest rate bets to the onshore market from derivative instruments in the non-deliverable rupee.

Traders will also track systemic liquidity and the overnight MIBOR, 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.

The one-year swap rate is seen in a range of 5.40-5.55% and the five-year contract is seen at 5.68-5.80%. On Monday, the one-year rate ended at 5.47% and the five-year rate ended at 5.76%.

CALL

On Tuesday, the one-day call money rate may open below the RBI's repo rate due to the lack of any major outflows amid ample surplus liquidity in the banking system, dealers said. Several traders expect a variable rate reverse repo auction to be held Tuesday and will look out for any announcement on the same. Later in the week, demand for funds may rise as outflows for GST payments are likely to drain liquidity, dealers said. During the day, the one-day call money rate is seen in a range of 4.85-5.50%, dealers said. The one-day call rate ended at 4.95% Monday.

RBI AUCTION

--Seven states to raise INR 136 billion via bond sale

LIQUIDITY

Total net inflows of INR 48.80 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 5.55 billion as coupon on state bonds

--INR 43.25 billion as coupon on 6.92%, 2039 gilt 

* Outflows

--Nil

End

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

Reported by Cassandra Carvalho

Edited by Ashish Shirke

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