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Informist, Saturday, Jan. 18, 2025

MUMBAI – Government bond prices and overnight indexed swap rates may open steady on Monday due to caution ahead of US President-elect Donald Trump's inauguration. Movement of US Treasury yields will also lend cues to both gilts and swaps.

Traders await any announcement by the Reserve Bank of India on measures to infuse durable liquidity into the banking system, dealers said. Any announcement on open market purchases of gilts or buyback auction may lead to volatility in both gilts and OIS rates, dealers said. Any geopolitical cues during the weekend or a further rise in crude oil prices will also impact gilt prices.

On Monday, the one-day call money rate may open above the RBI's repo rate of 6.50% due to demand for funds from banks early in the day to meet their reserve requirements. During the day, the call rate is seen in a range of 6.00-6.70%, dealers said.

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 ended near record lows on Friday 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 President-elect 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%.

CALL 

On Monday, the one-day call money rate may open above the RBI's repo rate of 6.50% due to demand for funds from banks early in the day to meet their reserve requirements. The RBI will conduct an overnight repo operation for a notified amount of INR 1.25 trillion at 1000-1030 IST.

During the day, the call rate is seen in a range of 6.00-6.70%, dealers said. The two-day call rate ended at 5.75% on Saturday.

RBI AUCTION

--RBI to conduct an overnight variable rate repo auction for INR 1.25 trillion

LIQUIDITY

--Total net outflows of INR 345.35 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 6.37 billion on coupon of 6.83%, 2039 gilt on Sunday 

--INR 2.95 billion as coupon on state bonds on Sunday

--INR 5.33 billion as coupon on state bonds on Monday

* Outflows

--INR 360.00 billion on payment for gilts 

--INR 39.80 billion redemption on 5-day variable rate repo tender

--INR 334.67 billion redemption on 3-day variable rate repo tender

End

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

Reported by Srijita Bose

Edited by Tanima Banerjee

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