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Informist, Wednesday, Nov. 26, 2025

MUMBAI – Government bond prices and overnight indexed swap rates are likely to track the overnight movement of US Treasury yields, dealers said. 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 had 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.

Traders will also track geopolitical developments, especially those related to the India-US trade deal. Most traders expect more clarity on this front by the month-end. 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. The rupee's movement against the dollar is also closely tracked, as some traders fear the MPC may avoid cutting rates in the face of the rupee's recent weakness. The domestic unit hit a record low of 89.4950 a dollar on Friday and has since recovered 0.5% only with the RBI's constant intervention.

On Thursday, the one-day call money rate may open below the RBI's repo rate due to lack of major outflows amid comfortable liquidity. During the day, the one-day call money rate is seen in a range of 4.85-5.50%, dealers said.

GOVERNMENT BONDS

On Thursday, government bond prices may track overnight movements in US Treasury yields. Traders will also focus on the domestic rate trajectory as bets of a soft policy 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. Any gains in bond prices Thursday may be tempered by short sales ahead of the INR-320-billion gilt auction Friday. 

Traders will also watch out for bond purchases of around INR 120 billion from the Deposit Insurance and Credit Guarantee Corp., a wholly owned subsidiary of the RBI. Traders expect the institution to bid for the seven-year gilt at Friday's auction. 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% Thursday. The yield on the 6.33%, 2035 bond is seen at 6.42-6.52%. Wednesday, the 10-year benchmark 6.48%, 2035 gilt closed at INR 100.20, or 6.45% yield, while the 6.33%, 2035 bond ended at INR 98.86, or 6.49% yield.

OIS RATES

On Thursday, 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 largely been priced in, they said. Traders will also track the overnight Mumbai Interbank Outright Rate for cues, dealers said. The one-year swap rate is seen at 5.38-5.50% and the five-year rate is seen at 5.66-5.75%. On Wednesday, the one-year swap rate ended at 5.42%, while the five-year swap rate closed at 5.69%.

CALL

On Thursday, the one-day call money rate may open below the RBI's repo rate due to lack of major outflows amid comfortable liquidity. 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 5.05% Wednesday.

RBI AUCTION

--Nil

LIQUIDITY

Total net outflows of INR 114.61 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 70.00 billion as redemption of 182-day Treasury bills

--INR 61.13 billion as redemption of 364-day T-bills

--INR 10.55 billion as coupon on state bonds

--INR 13.34 billion as coupon on 7.02%, 2027 gilt

--INR 5.00 billion as redemption of state bonds

* Outflows

--INR 140.06 billion as payment for 91-day T-bills

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

--INR 64.56 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 Deepshikha Bhardwaj

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