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Informist, Monday, Jan. 6, 2025

MUMBAI – On Tuesday, bond prices and swap rates may take cues from the overnight movement of US Treasury yields, dealers said. Traders also await the release of the first advance estimate of India's GDP for 2024-25 (Apr-Mar), due at 1600 IST Tuesday. 

A lower-than-expected reading could be a positive cue for bond prices and swap rates as slowing growth would boost rate cut expectation. An Informist Poll estimated India's GDP growth at a four-year low of 6.4% in FY25.

Traders will also track the number of Human Metapneumovirus (HMPV) cases in the country, with the first three cases confirmed by the central government on Monday. Any shutdown or slowing of economic progress, similar to lockdowns seen during the COVID-19 pandemic era, would see a rise in gilt prices as the RBI could cut rates sooner to aid economic growth. 

Traders look ahead to US jobs data at the end of the week and domestic CPI data due next week for interest rate cues. Any major geopolitical developments and a further rise in crude oil prices could also lend cues to gilt prices and swap rates at the open.

On Tuesday, the one-day call rate may open above the repo rate of 6.50% on demand for funds amid tax outflows. During the day, the call rate is seen in a range of 6.00-6.80%, dealers said.

GOVERNMENT BONDS

On Tuesday, bond prices may take cues from the overnight movement of US Treasury yields, dealers said. While traders expect a further rise in prices after the jump witnessed Monday, some caution could be seen before the release of the first advance estimate of GDP for FY25.

During the day, gilt prices will also track the movement in the Indian rupee against the dollar, after it hit a record closing low for the tenth straight session Monday.

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.68-6.80% during the day. On Monday, the 2034 bond settled at INR 100.28, or 6.75% yield.

OIS RATES

On Tuesday, swap rates may take cues from the movement of US yields. Traders also look ahead to the release of India's first advance GDP estimate for FY25, scheduled for release at 1600 IST, dealers said.

The swap rate in the one-year segment is seen at 6.42-6.55% and in the five-year segment at 6.10-6.25%. On Monday, the one-year swap rate ended at 6.48% and the five-year swap rate closed at 6.18%.

CALL 

On Tuesday, the one-day call rate may open above the repo rate of 6.50% on demand for funds amidst tax outflows. During the day, the call rate is seen in a range of 6.00-6.80%, dealers said. On Monday, the one-day call rate ended at 5.75%.

RBI AUCTION

--10 states to raise INR 215 bln via bond sale on Tuesday

--RBI to conduct a three-day VRR auction for INR 500 billion at 1000-1030 IST Tuesday 

LIQUIDITY

--Total net inflows of INR 3.98 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 3.98 billion as coupon on state bonds

* Outflows

--Nil

End

Reported by Cassandra Carvalho and Vidhushi RajPurohit

Edited by Deepshikha Bhardwaj

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