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Informist, Monday, Nov. 24, 2025

MUMBAI – Government bond prices may open slightly higher and overnight indexed swap rates may open lower Tuesday, as bets of a rate cut by the Reserve Bank of India's Monetary Policy Committee in its meeting in December have gained momentum after RBI Governor Sanjay Malhotra Monday said the latest economic data has increased the scope for a rate cut.

Gilts and swaps may also take cues from the overnight movement of US Treasury yields. Dealers will also focus on India's GDP data for the September quarter, which is scheduled Friday. The GDP data is the next cue for the domestic rate trajectory. Traders largely expect a print of around 7.2%, against the RBI's projection of 7.0%. Some traders have priced in a higher print, since the RBI said that while Jul-Sept growth will be strong, the growth trajectory December quarter onwards could be weaker due to external risks, dealers said.

The central bank's management of the rupee, after it hit a record low Friday, would also be closely watched, dealers said. Some traders also expect announcement of an India-US trade deal soon, which may dent bond prices and push up swap rates. A deal would lead to a higher growth outlook and reduce the need for open-market operations auctions, dealers said. At the same time, it may support the rupee and allay traders' concern that the RBI would hold off on monetary policy easing to protect the currency.

On Tuesday, the one-day call money rate may open near the RBI's repo rate on early demand for funds due to outflows for goods and services tax payments. During the day, the one-day call money rate is seen in a range of 4.85-5.60%, dealers said.

GOVERNMENT BONDS

On Tuesday, bond prices may open higher as bets of a rate cut gain momentum closer to the MPC meeting next month, after RBI Governor Malhotra's comments Monday. Bonds may also track the overnight movement of US Treasury yields. Some sections of the market are of the view that the near-zero CPI inflation print in October has made enough case for a rate cut by the MPC next month. Others see the decision contingent on the impact of higher US tariffs on India's GDP growth, dealers said. However, gains may be limited as traders will refrain from aggressive purchases ahead of India's September quarter GDP data Friday. 

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.42-6.50% Tuesday. The yield on the 6.33%, 2035 bond is seen at 6.48-6.55%. Monday, the 10-year benchmark 6.48%, 2035 gilt closed at INR 100.02, or 6.48% yield, while the 6.33%, 2035 bond ended at INR 98.68, or 6.52% yield.

OIS RATES

On Tuesday, swap rates are likely to track movement of US Treasury yields, dealers said. Rise in swap rates is less likely after RBI Governor Malhotra reiterated that space for a rate cut remains open and OIS rates may inch lower closer to the rate decision.

Traders will also track systemic liquidity and the overnight Mumbai Interbank Outright Rate, dealers said. Traders may continue to focus on swaps maturing in under a year to adjust their rate-cut bets and bet on the spread between MIBOR and money market rates. The one-year swap rate is seen at 5.40-5.55% and the five-year rate is seen at 5.68-5.85%. On Monday, the one-year swap rate ended at 5.44%, while the five-year swap rate closed at 5.71%.

CALL

On Tuesday, the one-day call money rate may open near the RBI's repo rate on early demand for funds due to outflows for GST payments. 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 5.50% Monday.

RBI AUCTION

--Fourteen states to raise INR 265.50 billion via bond sale

LIQUIDITY

Total net inflows of INR 83.97 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 6.43 billion as coupon on state bonds

--INR 42.54 billion as coupon on 7.09%, 2074 gilt

--INR 35.00 billion as redemption of state bonds

* 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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