India Money Market Outlook
Gilts, swaps to track US ylds post FOMC minutes
This story was originally published at 21:24 IST on 8 January 2025
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MUMBAI – On Thursday, government bond prices and overnight indexed swap rates may take cues from the overnight movement of US Treasury yields after the minutes of the US Federal Open Market Committee's December meeting and its economic forecast are released, dealers said.
US private jobs data and weekly jobless claims are also awaited, dealers said. Weekly jobless claims were lower than consensus estimates for the week ended Saturday, another data print pointing to resilience in the US economy.
Traders will also track the number of human metapneumovirus, or HMPV, cases in India, with seven cases confirmed by the central government Tuesday. Any shutdown or slowing of economic activity, similar to lockdowns seen during the COVID-19 pandemic, would see a rise in gilt prices as the Reserve Bank of India could cut rates sooner to aid economic growth.
Traders will also start taking positions ahead of India's CPI inflation data for December on Monday. Any major geopolitical developments and a further rise in crude oil prices could also lend cues to gilt prices and swap rates at the opening.
On Thursday, the one-day call rate may open above the repo rate of 6.50% on demand for funds from banks. During the day, the call rate is seen in a range of 6.00-6.80%, dealers said.
GOVERNMENT BONDS
On Thursday, bond prices may take cues from the overnight movement of US Treasury yields after the release of economic data, dealers said. Traders will also take cues from the INR 250-billion government bond buyback auction at 1030-1130 IST Thursday.
During the day, gilt prices will also track the movement of the Indian rupee against the dollar, after it hit a record closing low yet again Wednesday. Any major geopolitical developments and a further rise 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 6.72-6.80% during the day. On Wednesday, the bond settled at INR 100.14, or 6.77% yield.
OIS RATES
On Thursday, swap rates may take cues from the overnight movement of US Treasury yields after the release of economic data, dealers said. Any offshore or domestic corporate flows would also lend cues to swap rates.
The swap rate in the one-year segment is seen at 6.42-6.55% and in the five-year segment at 6.10-6.26%. On Wednesday, the one-year swap rate ended at 6.50% and the five-year swap rate closed at 6.20%.
CALL
On Thursday, the one-day call rate may open above the repo rate of 6.50% on demand for funds from banks. 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 6.74%.
RBI AUCTION
--Govt to buy back INR 250 bln worth of five gilts
--RBI to hold overnight VRR auction for INR 500 bln from 1000-1030 IST
LIQUIDITY
--Total net outflows of INR 38.28 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 134.85 billion on redemption of 91-day T-bills
--INR 60.00 billion on redemption of 182-day T-bills
--INR 90.16 billion on redemption of 364-day T-bills
--INR 28.91 billion as coupon on 8.33%, 2026 gilt
--INR 4.51 billion as coupon on state bonds
* Outflows
--INR 182.00 billion as payment on 91-day T-bills
--INR 93.00 billion as payment on 182-day T-bills
--INR 81.72 billion as payment on 364-day T-bills
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Reported by Cassandra Carvalho
Edited by Ashish Shirke
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