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Informist, Tuesday, Nov. 25, 2025

MUMBAI – Government bonds may open higher and overnight indexed swap rates may open lower Wednesday, tracking a fall in US Treasury yields after economic data released in the US boosted chances of a rate cut by the US Federal Open Market Committee next month, dealers said. September wholesale inflation rose to 0.3% in the US from a negative 0.1% in August, in data that was delayed due to the government shutdown. Producer prices excluding food and energy rose 0.1%, against a Wall Street Journal poll of 0.2%. September retail sales rose 0.2%, from 0.6% the previous month. ADP data showed that in the four weeks ended Nov. 8, private employers shed an average of 13,500 jobs per week.

On the domestic front, 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. Dealers will also focus on India's GDP data for the September quarter, which is scheduled for Friday. The GDP data is the next cue for the domestic rate trajectory. India's GDP growth rate likely fell to a three-quarter low of 7.2% in the September quarter, according to the median of an Informist poll of economists. 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. With no recent developments, dealers said a continued 50% tariff on India's exports to the US may also prompt the RBI to ease monetary policy.

On Wednesday, the one-day call money rate may open near the RBI's repo rate on early demand for funds from primary dealerships. During the day, the one-day call money rate is seen in a range of 4.85-5.60%, dealers said.

GOVERNMENT BONDS

On Wednesday, government bond prices may track overnight movements in US Treasury yields following the release of September US retail sales and Producer Price Index data. The impact of the offshore cue may be limited as traders focus on the domestic rate trajectory and bets of a rate cut next month gain momentum, nearing the MPC meeting. However, gains may be limited as traders will refrain from aggressive purchases ahead of India's September quarter GDP data due Friday.  

Later this week, inflows from the Deposit Insurance and Credit Guarantee Corp., a wholly owned subsidiary of the RBI, may boost prices of the 10-year and 15-year gilts. The RBI arm insures bank deposits up to INR 500,000 and the premium for the first half of the financial year will be paid by the last working day of November. The institution usually invests this premium in gilts, especially in the 10-year and 15-year segments. 

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.40-6.50% Wednesday. The yield on the 6.33%, 2035 bond is seen at 6.45-6.52%. Tuesday, the 10-year benchmark 6.48%, 2035 gilt closed at INR 100.17, or 6.46% yield, while the 6.33%, 2035 bond ended at INR 98.82, or 6.50% yield.

OIS RATES

On Wednesday, swap rates are likely to track movements in US Treasury yields. A rise in swap rates is less likely after RBI Governor Malhotra reiterated that space for a rate cut remains open, dealers said. OIS rates may inch lower closer to the rate decision on Dec. 5 though a 25-basis-point repo rate cut had already been priced in, they said.

Focus remains on India's September quarter GDP data on Friday, before the three-day MPC meeting starting Dec. 3. Traders will also track geopolitical developments, especially those related to the India-US trade deal.

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 Tuesday, the one-year swap rate ended at 5.42%, while the five-year swap rate closed at 5.71%.

CALL

On Wednesday, the one-day call money rate may open near the RBI's repo rate on early demand for funds from primary dealerships. 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 5.44% 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 94.96 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 27.72 billion as coupon on state bonds

--INR 128.00 billion as redemption of state bonds

* Outflows

--INR 250.67 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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