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Informist, Wednesday, Jan. 1, 2025

MUMBAI – Government bond prices and overnight indexed swap rates may open steady Thursday due to a lack of significant cues, dealers said. The impact of offshore cues may be limited as most global markets, including the US, are shut for New Year's Day. 

Dealers expect activity from foreign banks and private dealers to increase as they return to the trading desk after the annual year-end lull. Geopolitical developments and movement in crude oil prices could also impact gilt prices and swap rates at the open. 

On Thursday, the one-day call rate may open near the repo rate of 6.50% on demand for funds from banks.

GOVERNMENT BONDS

On Thursday, gilt prices may open steady owing to a lack of cues, dealers said. Volume is expected to pick up as traders will likely make room for the fresh supply of gilts at the weekly auction on Friday for INR 320 billion, and activity from foreign banks may also increase after the year-end lull.

Gilt prices will also track movement in the Indian rupee against the dollar after it hit a record closing low for the seventh straight session on Wednesday. Any major geopolitical developments and movement in crude oil prices could also lend cues to gilt prices at the open.

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.75-6.81% during the day. On Wednesday, the 2034 bond settled at INR 100.05, or 6.78% yield.

OIS RATES

Swap rates may open steady on Thursday due to a lack of significant cues on interest rates. Activity from foreign banks and foreign portfolio investors may increase after the lull at the year-end, as they return to trading desks in the new year. Offshore triggers may be limited, with most global markets – including the US – shut for New Year's Day.

Tight liquidity conditions in the banking system may result in upward pressure on short-term swap rates. The swap rate in the one-year segment is seen at 6.45-6.65% and in the five-year segment at 6.15-6.30%. On Wednesday, the one-year swap rate ended at 6.52% and the five-year swap rate closed at 6.24%.

CALL 

On Thursday, the one-day call rate may open near the repo rate of 6.50% on demand for funds. During the day, the call rate is seen in a range of 6.00-6.80%, dealers said. On Wednesday, the one-day call rate ended at 6.55%.

RBI AUCTION

--NIL

LIQUIDITY

--Total net outflows of INR 76.94 billion. Calculation of flows does not take into account redemption of the standing deposit facility and scheduled variable rate repo and reverse repo.

* Inflows

--INR 70.00 billion on redemption of 182-day T-bills

--INR 91.61 billion on redemption of 364-day T-bills

--INR 38.60 billion as coupon on 8.30%, 2040 gilt

--INR 4.47 billion as coupon on state bonds

* Outflows

--INR 120.00 billion as payment on 91-day T-bills

--INR 80.00 billion as payment on 182-day T-bills

--INR 81.62 billion as payment on 364-day T-bills

End

Reported by Vidhushi RajPurohit

Edited by Saji George Titus

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