India Money Market Outlook
2-day call rate seen opening below repo rate Sat
This story was originally published at 20:49 IST on 17 January 2025
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MUMBAI – On Saturday, the two-day call money rate may open below the repo rate of 6.50% due to low demand for funds as banks have already met regulatory requirements on Friday, dealers said. As is usually the case on Saturdays, volumes are expected to be low. During the day, the call rate is seen in a range of 6.00-6.60%, dealers said. The 3-day call rate ended at 6.45% on Friday.
Government bonds and overnight indexed swap rates are not traded on Saturday. Gilts and swaps may open steady on caution ahead of US President-elect Donald Trump's inauguration on Monday. Movement of US Treasury yields will also lend cues to both gilts and swaps. Geopolitical news over the next two days, along with US data points, may lend cues to US yields. Any announcement by the Reserve Bank of India on liquidity measures will also provide cues.
GOVERNMENT BONDS
On Monday, bond prices may open steady on caution ahead of US president-elect Donald Trump's inauguration. 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 on 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 6.73-6.80% during the day. On Friday, the 2034 bond settled at INR 100.16, or 6.77% yield.
OIS RATES
On Monday, swap rates will take cues from the movement in US yields over the weekend. Any announcement from the RBI on infusion of durable liquidity could also lend cues, dealers said. Any such announcement will also lead to rates falling sharply, particularly on shorter tenures, dealers said.
The inauguration of Donald Trump on Monday will also be awaited for cues. The movement in crude oil prices may also lend direction. The swap rate in the one-year segment is seen at 6.40-6.56% and in the five-year segment at 6.18-6.30%. On Friday, the one-year swap rate ended at 6.47% and the five-year swap rate closed at 6.24%.
RBI AUCTION
--Nil
LIQUIDITY
--Total net inflows of INR 3.05 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 3.05 billion as coupon on state bonds
* Outflows
--Nil
End
Reported by Vidhushi RajPurohit
Edited by Saji George Titus
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