More Stories

Informist, Wednesday, Dec. 31, 2025

MUMBAI – Government bond prices and overnight indexed swap rates are seen opening steady due to a lack of fresh cues Thursday, dealers said. Trade volume is likely to be thin because several traders are on leave for the New Year and many offshore markets are closed. Both gilts and swaps may track the movement in the rupee against the dollar and crude oil prices, dealers said. 

India's advance estimate of GDP for 2025-26 (Apr-Mar), released in the first week of January, may also be crucial for traders to place bets on further repo rate cuts by the Reserve Bank of India's Monetary Policy Committee, though no rate-cut bets for February are currently reflected in OIS rates, dealers said. After India's CPI for November was essentially a "non-event" for swaps, traders are focusing on CPI prints from January onwards, with the RBI projecting retail inflation to average 2.9% in the Jan-Mar quarter. 

On Thursday, the one-day call money rate may open near the RBI's repo rate of 5.25% amid tight liquidity, even as the banking system liquidity may turn to surplus on the Centre's expenditure for salaries and pension payouts this week, dealers said. Systemic liquidity is seen returning to a comfortable surplus only by mid-January, after the next open market operation auctions and a three-year $10 billion dollar-rupee buy-sell swap auction add to durable liquidity. The RBI will conduct an overnight variable rate repo auction of INR 1.00 trillion at 0930-1000 IST Thursday. During the day, the one-day call money rate is expected to move in a range of 4.70-5.65%, dealers said. 

GOVERNMENT BONDS

On Thursday, at open, gilts will likely be steady amid lack of significant cues. Traders expect states' borrowing calendar for the March quarter between INR 4.5 trillion and INR 5.0 trillion. The announcement is expected Thursday. If the borrowing calendar surprises on the higher side, the yield on the 10-year benchmark 6.48%, 2035 gilt may rise to as high as 6.70%, dealers said.

Short sales ahead of the weekly gilt auction Friday, is likely to weigh on the bond prices, dealers said. The government will sell INR 320 billion of 6.48%, 2035 bond Friday. Demand for the 10-year benchmark 6.48%, 2035 bond at auction is expected to be adequate as risk appetite improves in the new year, with the return of foreign investors.

After market hours Tuesday, the RBI said it will purchase seven gilts worth INR 500 billion Monday. The 7.10%, 2029, the 7.95%, 2032, the 7.73%, 2034, the 7.40%, 2035, the 7.41%, 2036, the 8.30%, 2040, and the 7.09%, 2054 bonds are selected for the OMO auction. 

In January, traders expect bond prices to rise due to lower supply as the RBI has scheduled the remaining three tranches of open market operation auctions of INR 500 billion each. Expected foreign inflows due to the likely inclusion of Indian government bonds in Bloomberg's Global Aggregate Index in January will push bond prices higher, dealers said. The banking system liquidity will also likely be in a surplus by mid-January, dealers said.   

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.53-6.63%. On Wednesday, the 10-year benchmark bond ended at INR 99.22, or 6.59% yield.

OIS RATES

On Thursday, swap rates may open steady due to a lack of fresh cues, dealers said. Trade volume is likely to be thin because several traders are on leave for the New Year and many offshore markets are closed.

In January, foreign banks, primary dealers, and offshore traders are expected to resume active trading and are likely to receive swap rates, dealers said. Market participants expect inflows into debt instruments from foreign portfolio investors to begin in the new year and to exceed $25 billion in 2026 as India's fully accessible route bonds are expected to be added to Bloomberg's flagship Global Aggregate Index. This may pull down swap rates, dealers said.

The one-year swap rate is seen at 5.40-5.52% and the five-year at 5.85-6.02%. The one-year swap rate ended at 5.46% Wednesday. The five-year rate closed at 5.92%.

CALL

On Thursday, the one-day call money rate may open near the RBI's repo rate of 5.25% amid tight liquidity, even as the banking system liquidity may turn to surplus on the Centre's expenditure for salaries and pension payouts this week, dealers said. Systemic liquidity is seen returning to a comfortable surplus only by mid-January, after the next open market operation auctions and a three-year $10 billion dollar-rupee buy-sell swap auction add to durable liquidity. The RBI will conduct an overnight variable rate repo auction of INR 1.00 trillion at 0930-1000 IST Thursday. During the day, the one-day call money rate is expected to move in a range of 4.70-5.65%, dealers said. The one-day call rate ended at 4.85% Wednesday.

RBI AUCTION

--RBI to hold overnight variable rate repo auction for INR 1.00 trillion 0930-1000 IST 

LIQUIDITY

Total net inflows of INR 161.68 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 60.00 billion as redemption of 182-day Treasury bills 

--INR 81.62 billion as redemption of 364-day T-bills

--INR 20.06 billion as coupon on state bonds

* Outflows

--INR 1.44 trillion as reversal of two-day variable rate repo tender

--INR 307.70 billion as reversal of overnight variable rate repo tender

End

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

Reported by Cassandra Carvalho

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.