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Informist, Thursday, Dec. 18, 2025

 

NEW DELHI – Government bond prices and overnight indexed swap rates Friday may track the overnight movement in US Treasury yields after the release of US inflation data for November. US Treasury yields were down slightly after data showed CPI inflation in the US rose to 2.7% in November, lower than the 3.1% projected by economists in a poll by The Wall Street Journal.

 

Gilt traders may refrain from taking large bets early in the day ahead of the INR-300-billion gilts auction. Bond and swap traders may take cues from the movement in the rupee and also monitor developments around the India-US trade deal. They will also track crude oil prices for cues.

 

The one-day call money rate may open above the RBI's repo rate of 5.25%, around 5.50%, as liquidity is expected to remain in deficit and under pressure from outflows for goods and services tax payments. During the day, the one-day call money rate is seen moving in a range of 4.80-5.50%, dealers said.

 

GOVERNMENT BONDS

On Friday, gilts are expected to track the overnight movement of US Treasury yields. The movement of OIS and rupee early in the trade may also lend cues, dealers said. Traders may refrain from taking large bets early in the day ahead of the INR-300-billion gilts auction.

 

Most traders do not expect any significant impact on bond prices of the US CPI data for November. They will monitor the Bank of Japan's interest rate decision Friday for cues on global bond yield movements.

 

Traders will monitor developments around the India-US trade deal. They may also track crude oil prices. Some traders are hopeful of the inclusion of Indian bonds in Bloomberg's Global Aggregate Index in January, which will pull bond prices up.

 

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.54-6.63%. The yield on the 6.33%, 2035 bond is seen at 6.56-6.65%. Thursday, the 6.48%, 2035 bond ended at INR 99.32, or 6.57% yield, while the 6.33%, 2035 gilt ended at INR 98.15, or 6.60% yield.

 

OIS RATES

On Friday, swaps may track the overnight movement of US Treasury yields after the publication of US inflation data for November. US CPI rose 2.7% on year in November, lower than the rise of 3.1% expected by a Wall Street Journal poll.

 

Offshore flows are likely to continue to drive movement in OIS rates due to the lack of interest rate cues on the domestic front. Activity may continue to hold up this week but will decline in the Christmas week and heading into the New Year as offshore traders close their accounts at the year-end or go on holiday, dealers said.

 

Traders also await the BoJ's rate decision Friday for cues on global rate movements. The Japanese central bank is expected to raise its policy rate to its highest level since 1995. Some offshore investors have recently taken a call to pay fixed rate contracts in markets across Asia due to the current geopolitical and monetary policy conditions, dealers said.

 

On the domestic front, traders are waiting for the minutes of the RBI Monetary Policy Committee's December meeting, due Friday. Traders largely expect neutral commentary from the rate-setting panel, with indications of liquidity measures, dealers said. After India's CPI for November was largely a "non-event" for swaps, traders are focused more on the CPI prints from January, with the RBI projecting retail inflation to average 0.6% in the December quarter. India's GDP estimate for the financial year 2025-26 (Apr-Mar) in the first week of January may also be crucial for traders to take bets on further repo rate cuts by the Monetary Policy Committee, dealers said.

 

Swaps may also track the rupee's movement against the dollar and its impact on dollar-rupee forward premiums. They may also track the movement of gilt yields after the result of the weekly auction Friday.

 

Traders will monitor developments around the India-US trade deal and may also track crude oil prices for cues. The one-year swap rate is seen at 5.38-5.60% and the five-year swap rate is seen at 5.78-6.02%. The one-year rate ended at 5.48% and the five-year rate closed at 5.91% Thursday.

 

CALL

On Friday, the one-day call money rate may open above the RBI's repo rate of 5.25%, at around 5.50%, as liquidity is expected to remain in deficit and owing to pressure from outflows for GST payments. Dealers expect another variable rate repo auction Friday to infuse transient liquidity in the banking system. During the day, the one-day call money rate is seen moving in a range of 4.80-5.50%, dealers said. The one-day call rate ended at 4.80% Thursday.

 

RBI AUCTION

--Govt to auction two gilts worth INR 300 billion Friday

 

LIQUIDITY

Total net inflows of INR 182.09 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 9.95 billion as coupon on state bonds

--INR 43.50 billion as coupon on 7.73%, 2034 gilt

--INR 57.46 billion as coupon on 7.41%, 2036 gilt

--INR 71.18 billion as coupon on 7.30%, 2053 gilt

 

* Outflows

--Nil

 

End

 

Reported by Shubham Rana

Edited by Rajeev Pai

 

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