More Stories

Informist, Thursday, Dec. 4, 2025

MUMBAI – Government bond prices and overnight indexed swap rates may open steady Friday ahead of the Reserve Bank of India Governor Sanjay Malhotra's speech outlining the Monetary Policy Committee meeting decision at 1000 IST. Traders are divided on their views on rates.

Some traders expect the MPC to cut the repo rate by 25 basis points to support growth after the near-zero CPI inflation in October. Others said the rate-setting panel would avoid using its limited rate ammunition after data showed India's GDP growth was at a six-quarter high of 8.2% in the September quarter.

With no breakthrough yet on an India-US trade deal, dealers said the continued 50% tariff on India's exports to the US could prompt the RBI to ease monetary policy. On the other hand, traders fear the RBI may avoid cutting rates amid the rupee's recent weakness. The domestic currency fell to a record low of 90.42 a dollar Thursday, before recovering to 89.98 a dollar by the end of the session.

Bond prices may rise as traders expect the RBI to announce a calendar for purchasing gilts through open market operations. Traders estimate the central bank will buy INR 1.5 trillion to INR 2.0 trillion worth of gilts by March. The additional demand from the RBI is likely to keep gilt yields capped despite reduced risk appetite from market participants.

The overnight movement in US Treasury yields may also lend cues, though the impact of the global cue may be limited ahead of the key domestic event, dealers said. Investors also await the delayed US Personal Consumption Expenditures Price Index data for September Friday. Traders will look to the US Federal Open Market Committee's policy decision next week, with some saying the RBI may avoid a rate cut this week and decide on it in February after seeing the FOMC outcome.

On Friday, the three-day call money rate may open near the RBI's repo rate, though trades may be scant before the policy announcement. During the day, the three-day call money rate is seen in a range of 4.75-5.50%, dealers said.

GOVERNMENT BONDS

On Friday, gilt prices may open steady before RBI Governor Malhotra outlines the decisions of the Monetary Policy Committee at 1000 IST, dealers said. An overnight movement in US Treasury yields and the rupee's early movement may lend cues before the announcement.

Traders remain divided on whether the MPC will cut the repo rate or maintain status quo for the third straight meeting. Dealers are more hopeful the central bank will announce open market operations to buy bonds in the rest of the financial year ending March, which will buoy gilt prices.

After the policy announcement, focus will shift to the gilt auction at 1230-1330 IST. The government will sell INR 320 billion of the 6.48%, 2035 gilt. Traders said the rate decision and commentary would likely determine demand for the 10-year benchmark gilt at auction.

Movement of crude oil prices may also influence gilts. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.40-6.58% Friday. The yield on the 6.33%, 2035 bond is seen at 6.38-6.60%. On Thursday, the 6.48%, 2035 bond ended at INR 99.75, or 6.51% yield, while the 6.33%, 2035 bond ended at INR 98.63, or 6.53% yield.

OIS RATES

Swap rates are likely to open steady Friday before RBI Governor Malhotra announces the decision of the MPC at 1000 IST. Traders have largely priced in status quo on rates at the meeting after higher-than-expected GDP growth in the September quarter. Swap rates will fall sharply if the panel does decide to cut the repo rate, dealers said.

After the decision, market participants will be more focused on comments by the RBI governor and the panel on the future direction of rates. A rate cut of 25 bps may pull down the one-year swap rate to 5.40% and any hints of further easing may lead the rate to fall below the psychologically crucial mark.

No rate cuts may lead to a rise to 5.52-5.55%, where traders will begin receiving swap rates again on a positive return against the MIBOR fixing, dealers said. The one-year swap rate is seen at 5.35-5.55% and the five-year rate is seen at 5.68-5.85%. On Thursday, the one-year swap rate ended at 5.48% and the five-year swap rate ended at 5.82%

CALL

On Friday, the three-day call money rate may open near the RBI's repo rate of 5.50% ahead of the variable rate reverse repo auction. Trades will likely be scant before RBI Governor Sanjay Malhotra outlines the Monetary Policy Committee's decision at 1000 IST, dealers said.

Borrowers would like to take advantage of lower rates if the MPC cuts the repo rate by 25 basis points to 5.25%. Traders look forward to the rate decision as well as comments on liquidity management from RBI officials for further cues. 

During the day, the three-day call money rate is seen in a range of 4.75-5.50%, dealers said. The RBI will Friday conduct a three-day VRRR auction for INR 1 trillion between 1200 IST and 1230 IST, against redemptions of two VRRRs worth nearly INR 1.3 trillion.

RBI AUCTION

--RBI to hold three-day VRRR auction for INR 1.00 tln 1200-1230 IST

--Govt to auction INR 320 billion of 6.48%, 2035 gilt at 1230-1330 IST

LIQUIDITY

Total net outflows of INR 97.74 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 15.01 billion as coupon on state bonds 

--INR 42.03 billion as coupon on 8.97%, 2030 gilt

--INR 40.70 billion as coupon on 6.57%, 2033 gilt

--INR 569.35 billion as redemption of four-day variable rate reverse repo tender

--INR 723.77 billion as redemption of four-day variable rate reverse repo tender

* 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

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.