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Informist, Wednesday, Nov. 19, 2025

 

MUMBAI – On Thursday, government bond prices and overnight indexed swap rates are likely to track the movement in the US Treasury yields at open, after the release of the minutes of the US Federal Open Market Committee's October meeting, dealers said. Movement in crude oil prices and the rupee may also influence gilts and swaps. 

 

Irrespective of the outcome of the FOMC minutes, the 10-year US yield is not expected to rise above the key technical levels of 4.17-4.20%, dealers said. Traders are more concerned about the chances of a domestic rate cut in December. Ahead of the minutes, traders preferred taking positions in swaps rather than in gilts. 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.

 

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 operation 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. Traders may take cues from any news about developments at the meetings between RBI and economists.

 

On Thursday, the one-day call money rate may near the RBI's repo rate as outflows for goods and services tax payments drain systemic liquidity, 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. Some traders who see GST outflows of around INR 2.00 trillion expect a variable rate repo auction. During the day, the one-day call money rate is seen in a range of 4.85-5.60%, dealers said.

 

GOVERNMENT BONDS

On Thursday, bond prices may track overnight movement of US yields after the minutes of the US FOMC's October meeting are released, dealers said. Traders will track the net purchases and sales in the secondary market Wednesday from the 'Others' segment, the category that includes the RBI, even as expectations of the central bank purchasing gilts onscreen to bring down bond yields have diminished, dealers said.

 

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.45-6.53% Thursday. The yield on the 6.33%, 2035 bond is seen at 6.49-6.56%. The 6.48%, 2035 gilt Wednesday ended at INR 99.93, or 6.49% yield, while the 6.33%, 2035 bond ended at INR 98.59, or 6.53% yield.

 

OIS RATES

At open on Thursday, swap rates are likely to track movements in US yields after the release of the minutes of the US FOMC's October meeting, dealers said. Some traders received fixed-rate contracts Wednesday on bets that the FOMC minutes will indicate the scope for a 25-basis-point cut in the US in December, dealers said.

 

"For FOMC (minutes), people have made some positions in OIS, that will be a wise call to move with OIS (rather) than bonds," a dealer at a private sector bank said. Swaps may also track movement of government bond yields at open, dealers said.  

 

Meanwhile, corporate houses are likely to receive swap rates of up to two years, as seen since last week. This is likely because a large corporate house is shifting its interest rate bets from non-deliverable rupee derivatives to the onshore market. The one-year swap rate is seen at 5.40-5.55% and the five-year contract is seen at 5.68-5.80%. On Wednesday, the one-year rate ended at 5.45% and the five-year rate ended at 5.73%.

 

CALL

On Thursday, the one-day call money rate may near the RBI's repo rate as outflows for GST payments drain systemic liquidity, 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. Some traders who see GST outflows of around INR 2.00 trillion expect a variable rate repo auction. During the day, the one-day call money rate is seen in a range of 4.85-5.60%, dealers said. The one-day call rate ended at 5.00% Wednesday.

 

RBI AUCTION

--Nil

 

LIQUIDITY

Total net outflows of INR 83.50 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 119.00 billion as redemption of 91-day Treasury bills

--INR 75.00 billion as redemption of 182-day T-bills

--INR 7.14 billion as coupon on state bonds

--INR 10.00 billion as redemption of state bonds

 

* Outflows

--INR 156.65 billion as payment for 91-day T-bills

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

--INR 68.00 billion as payment for 364-day T-bills

 

End

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

 

Reported by Cassandra Carvalho

Edited by Vandana Hingorani

 

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