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Informist, Thursday, Jan. 16, 2025

MUMBAI – Government bond prices may open steady on caution ahead of the weekly gilt auction for INR 360 billion at 1030-1130 IST. The government will sell INR 140 billion of 6.75%, 2029 bond, INR 120 billion of 6.92%, 2039 bond and INR 100 billion of 7.09%, 2054 bond at auction.

Gilt prices and overnight indexed swap rates may also take cues from the movement in US Treasury yields after the release of data on retail sales and weekly unemployment claims, dealers said. Any announcement by the RBI in regard to measures to infuse durable liquidity into the banking system will also lend cues to both prices and swap rates, dealers said.

On Friday, the three-day call rate may open above the repo rate of 6.50% on demand for funds from banks, with liquidity conditions seen largely unchanged from Wednesday.

GOVERNMENT BONDS

On Friday, bond prices may open steady on caution ahead of the gilts auction at 1030-1130 IST. Prices will also take cues from US yields post the release of US data on retail sales and weekly unemployment claims. Any geopolitical cues or a further rise in crude oil prices will also impact gilt prices.

Gilts prices will also await any announcement by the RBI in regard to measures to infuse durable liquidity into the banking system, dealers said. Prices of gilts will also be sensitive to the movement in the Indian rupee against the dollar, as the Indian unit remained near record lows despite the dollar index falling.

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.71-6.79% during the day. On Thursday, the bond settled at INR 100.28, or 6.75% yield.

OIS RATES

On Friday, swap rates will take cues from the movement in US yields after the release of data on retail sales and weekly unemployment claims. The 10-year US Treasury yield was little changed at 2000 IST, despite jobless claims rising and retail sales missing estimates.

Swap rates may fall on Friday on receiving interest from both offshore and onshore traders on a more cemented rate cut view. Traders are also eyeing any announcement on open market purchases of gilts by the RBI, which will infuse durable liquidity in the banking system. Any such announcement will also lead to rates falling sharply, particularly on shorter tenures, dealers said.

The movement in crude oil prices may also lend direction. The swap rate in the one-year segment is seen at 6.39-6.47% and in the five-year segment at 6.18-6.27%. On Thursday, the one-year swap rate ended at 6.44% and the five-year swap rate closed at 6.23%.

CALL 

On Friday, the three-day call rate may open above the repo rate of 6.50% on demand for funds from banks, with liquidity conditions seen largely unchanged from Wednesday. During the day, the call rate is seen in a range of 6.00-6.80%, dealers said. On Thursday, the one-day call rate ended at 5.75%.

RBI AUCTION

--Government to auction three gilts worth INR 360 billion

--RBI to conduct a three-day variable rate repo auction for INR 500 billion

LIQUIDITY

--Total net inflows of INR 131.59 billion. Calculation of flows does not take into account redemption of the standing deposit facility and scheduled variable rate repo and reverse repo operations.

* Inflows

--INR 75.00 billion on redemption of 182-day T-bills 

--INR 51.01 billion as coupon on 6.54%, 2032 gilt

--INR 5.58 billion as coupon on state bonds

* Outflows

--INR 500.08 billion redemption on 4-day variable rate repo tender 

--INR 307.60 billion redemption on 1-day variable rate repo tender 

End

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

Reported by Vidhushi RajPurohit

Edited by Deepshikha Bhardwaj

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