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Informist, Monday, Dec. 1, 2025

MUMBAI – Government bond prices may open lower Tuesday as traders make room to pick up state bonds at the auction 1030-1130 IST, dealers said. Thirteen states will raise INR 313.50 billion at the auction Tuesday, more than the INR 210 billion scheduled in the indicative calendar for Oct-Dec for this week. Demand for bonds is seen lacklustre as traders do not expect a domestic rate cut after India's GDP growth rose to a six-quarter high of 8.2% in the September quarter.

Gilts and overnight indexed swap rates may also take cues from the overnight movement in US Treasury yields and crude oil prices, as well as the rupee during the day. Swap rates may inch higher Tuesday before the Reserve Bank of India's Monetary Policy Committee begins its three-day meeting Wednesday. However, traders have largely priced in a status quo at the policy meeting after higher-than-expected GDP growth in the September quarter and swap rates are unlikely to rise significantly from current levels, dealers said.

On Tuesday, the one-day call money rate may open below the RBI's repo rate due to surplus liquidity in the banking system. During the day, the one-day call money rate is seen in a range of 4.85-5.50%, dealers said.

GOVERNMENT BONDS

On Tuesday, bond prices may open lower as traders make room for fresh supply of state bonds. Focus will primarily be on the MPC outcome on Friday, dealers said.

Bond prices may also track the overnight movement of US Treasury yields. The yield on the 10-year benchmark US Treasury note was 4.10% at 2235 IST, from 4.05% at 1700 IST. On the global front, traders will look to the US Federal Open Market Committee's decision next week. Traders also await any news of the next US Federal Reserve chair appointee, as current Chair Jerome Powell's term ends in May. 

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.50-6.57% Tuesday. The yield on the 6.33%, 2035 bond is seen at 6.50-6.65%. The 6.48%, 2035 gilt ended at INR 99.62, or 6.53% yield, Monday, while the 6.33%, 2035 bond ended at INR 98.31, or 6.57% yield.

OIS RATES

Swap rates may inch higher Tuesday before the Monetary Policy Committee begins its three-day meeting Wednesday. The movement of US Treasury yields may also lend cues, especially with US Fed Chair Powell scheduled to speak late Monday.

Traders will also track geopolitical developments, especially those related to the India-US trade deal. Most traders expect more clarity on this front soon. 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 rate-settling panel of the RBI may avoid cutting rates in the face of the rupee's recent weakness. The domestic currency hit a record low of 89.7825 a dollar Monday.

Traders will also track the overnight Mumbai Interbank Outright Rate, dealers said. The one-year swap rate is seen at 5.38-5.50% and the five-year rate is seen at 5.70-5.85%. On Monday, the one-year rate ended at 5.49% and the five-year rate ended at 5.81%.

CALL

On Tuesday, the one-day call money rate may open below the RBI's repo rate due to surplus liquidity in the banking system. Inflows from the government's routine expenditure may also add to the liquidity surplus in the coming days.

During the day, the one-day call money rate is seen in a range of 4.85-5.50%, dealers said. Some traders expect the RBI to announce an overnight variable rate reverse repo auction this week to prevent the weighted average call rate falling to near 5.25%, the Standing Deposit Facility rate.

RBI AUCTION

--Thirteen states to raise INR 313.50 billion via bond sale at 1030-1130 IST

LIQUIDITY

Total net inflows of INR 58.95 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 12.88 billion as coupon on state bonds 

--INR 42.67 billion as coupon on 8.60%, 2028 gilt

--INR 3.40 billion as coupon on 6.79%, 2034 sovereign green bond

* Outflows

--Nil

End

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

Reported by Aaryan Khanna

Edited by Deepshikha Bhardwaj

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