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Informist, Tuesday, Nov. 18, 2025

MUMBAI – On Wednesday, government bond prices and overnight indexed swap rates are likely to track the movement in the US Treasury yields at open, dealers said. Movement in crude oil prices and the rupee may also influence gilts and swaps. 

Some traders expect an announcement about the India-US trade deal 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 a rate cut at the Reserve Bank of India's Monetary Policy Committee's meeting in December, some said the MPC may hold off on rate cuts if India's 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. Traders largely expect a print of around 7.2%. State Bank of India forecasts India's GDP growth for Jul-Sept at 7.5%, against the RBI's projection of 7.0%. Some traders have priced in a higher print, since the RBI has said that while Jul-Sept growth will be strong, the growth trajectory later on could be weaker due to external risks, dealers said. 

On the global front, the delayed US September jobs report is due Thursday. Bloomberg reported Tuesday that the initial applications for US jobless claims were 232,000 in the week ended Oct. 18, citing historical data for claims on the US Labor Department website. 

On Wednesday, the one-day call money rate may near the RBI's repo rate as outflows for goods and services tax payments are likely to start, dealers said. Expectations of a variable rate reverse repo auction announcement have reduced and any such announcement will be unexpected and thereby push up money market rates. During the day, the one-day call money rate is seen in the range of 4.85-5.50%, dealers said.

GOVERNMENT BONDS

On Wednesday, bond prices may track overnight movements in US Treasury yields at open, dealers said. Traders will track the net purchases and sales in the secondary market Tuesday from the 'Others' segment, the category that includes the RBI, following the net purchases of INR 21.05 billion Monday. Earlier assumptions that the central bank purchased gilts onscreen solely to replenish its portfolio after the redemption of the 5.15%, 2025 bond faded Tuesday, prompting traders to renew bets on support from the RBI at the Monetary Policy Committee meeting in December, either through a rate cut or by announcing a calendar for open market purchase of gilts through auction.

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.45-6.53% Wednesday. The yield on the 6.33%, 2035 bond is seen at 6.49-6.56%. The 6.48%, 2035 gilt Tuesday ended at INR 99.96, or 6.48% yield, while the 6.33%, 2035 bond ended at INR 98.63, or 6.53% yield.

OIS RATES

On Wednesday, 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 Mumbai Interbank Offered 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. 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 Tuesday, the one-year rate ended at 5.46% and the five-year rate ended at 5.74%.

CALL

On Wednesday, the one-day call money rate may near the RBI's repo rate as outflows for GST payments are likely to start, dealers said. Expectation of a variable rate reverse repo auction announcement have reduced and any such announcement will be unexpected and thereby push up money market rates. During the day, the one-day call money rate is seen in the range of 4.85-5.50%, dealers said. The one-day call rate ended at 5.00% Tuesday.

RBI AUCTION

--RBI to auction 91-day T-bills worth INR 70 billion

--RBI to auction 182-day T-bills worth INR 60 billion

--RBI to auction 364-day T-bills worth INR 60 billion

LIQUIDITY

Total net outflows of INR 127.00 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 9.00 billion as coupon on state bonds

* Outflows

--INR 136.00 billion as payment for state bonds

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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