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Informist, Thursday, Dec. 11, 2025

NEW DELHI – When the markets open Friday, government bond prices and overnight indexed swap rates may take cues from the overnight movement of US Treasury yields and the rupee's movement early in the trade, dealers said.

Traders will also track the result of the weekly gilt auction. The government will sell INR 160 billion of the 6.68%, 2040 bond and INR 120 billion of the 6.90%, 2065 gilt at 1030-1130 IST. Traders will likely place some short bets ahead of the auction to make space in their portfolio for the fresh auction supply. Demand is seen firm due to replacement demand after sale of INR 500 billion worth of gilts to the Reserve Bank of India at the OMO auction Thursday.  

Traders may refrain from aggressive bets ahead of CPI inflation data for November at 1600 IST. India's CPI inflation is expected to rise to 0.7% in November from a record low of 0.25% in October, mainly as the statistical effect of a favourable base begins to fade, according to an Informist poll of 17 economists. Traders have priced in this estimate and swaps may only react--on the upside--if CPI inflation is 1.0% or higher. Otherwise, the data may not lend significant cues as the bar for a domestic rate cut in February remains high, dealers said.

On Friday, the three-day call money rate may open near the RBI's repo rate of 5.25% on early demand for funds. The first tranche of the RBI's open market operation to buy bonds via auction held Thursday will infuse INR 500 billion of liquidity Friday. During the day, the one-day call money rate is seen in a range of 4.50-5.25%, dealers said.

GOVERNMENT BONDS

Gilts will track the overnight movement of US Treasury yields. The rupee's movement early in the trade will also lend cues, dealers said.

Traders will also track the result of the weekly gilt auction. The government will sell INR 160 billion of the 6.68%, 2040 bond and INR 120 billion of the 6.90%, 2065 gilt at 1030-1130 IST. Traders will likely place some short bets ahead of the auction to make space in their portfolio for the fresh auction supply. Demand is seen firm due to replacement demand after sale of INR 500 billion worth of gilts to the RBI at the OMO auction Thursday. 

Traders may refrain from aggressive bets ahead of CPI inflation data for November at 1600 IST. India's CPI inflation is expected to rise to 0.7% in November from a record low of 0.25% in the previous month, mainly as the statistical effect of a favourable base fades away, according to an Informist poll of 17 economists. Traders have priced in this estimate, and bond prices may only react--on the downside--if the data comes in at 1.0% or higher. Otherwise, the data may not lend significant cues as the bar for a rate cut in February remains high, dealers said.

Traders also await announcement of the details of the second tranche of the OMO purchases for INR 500 billion on Dec. 18, with expectations that the RBI will buy liquid, profitable papers such as the 6.33%, 2035 gilt.

Traders will monitor developments on the India-US trade deal and may also track crude oil prices for cues. Commerce Minister Piyush Goyal Thursday said the recent visit of US officials to India was not for trade deal talks. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.53-6.63% Friday. The yield on the 6.33%, 2035 bond is seen at 6.56-6.66%.

OIS RATES

Swaps will track the overnight movement of US Treasury yields after the release of weekly jobless claims data. The rupee's movement in early trade will also lend cues, dealers said. Swaps may also track the movement of bond yields. Offshore flows are likely to continue to drive movement of OIS rates due to lack of interest rate cues on the domestic front after Friday's repo rate cut.

Traders may refrain from aggressive bets ahead of CPI inflation data for November. Traders are more focused on the CPI prints January onwards, with the RBI projecting retail inflation to average 0.6% in the December quarter. Another cut in the repo rate is seen unlikely at this stage unless India's GDP growth slumps, dealers said.

Traders will monitor developments in the India-US trade deal and may also track crude oil prices for cues. The one-year swap rate is seen at 5.40-5.55% and the five-year swap rate is seen at 5.85-6.02%.

CALL

On Friday, the three-day call money rate may open near the RBI's repo rate of 5.25% on early demand for funds. The first tranche of the RBI's open market operation to buy bonds via auction held Thursday will infuse INR 500 billion of liquidity Friday. During the day, the one-day call money rate is seen in a range of 4.50-5.25%, dealers said.

The central bank may conduct a VRR auction Friday or early next week, due to liquidity requirements of banks amid advance tax outflows of around INR 1.5 trillion starting over the weekend.

RBI AUCTION

--Govt to sell INR 160 billion of the 6.68%, 2040 bond and INR 120 billion of the 6.90%, 2065 gilt 1030-1130 IST

LIQUIDITY

Total net inflows of INR 135.04 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 7.52 billion as coupon on state bonds

--INR 40.52 billion as coupon on 8.83%, 2041 bond

--INR 87.00 billion as coupon on 7.25%, 2063 bond

* Outflows

--nil

End

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

Reported by Kabir Sharma

Edited by Ashish Shirke

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