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Informist, Tuesday, Jan. 21, 2025

MUMBAI – On Wednesday, government bonds and overnight indexed swap rates will take cues from the movement in US yields. Any comments by US President Trump or measures that are seen as inflationary could impact US yields, dealers said.  

Any geopolitical cues or a further rise in crude oil prices after the US event will also impact both gilts and swaps. Traders will also take cues from the movement of the Indian rupee against the dollar, dealers said.

On Wednesday, the one-day call money rate may open above the Reserve Bank of India's repo rate of 6.50% due to the 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 Wednesday, bond prices will react to the movement in US yields. Any announcement on tariffs and taxes by US President Trump will also give cues to gilts, dealers said.

During the day, prices of gilts will also be sensitive to the movement of the Indian rupee against the dollar, dealers said. Some traders were uncertain of foreign investment into India's debt as the rupee did not appreciate Tuesday against the dollar despite a sharp fall in the dollar index following the lack of tariffs and other inflationary policies by Trump.

Any geopolitical cues or a further rise in crude oil prices after the US event will also impact gilt prices. The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.70-6.80% during the day. On Tuesday, the bond settled at INR 100.36, or 6.74% yield.

OIS RATES

On Wednesday, swap rates will take cues from the movement in US yields. Any comments by US President Trump or measures that are seen as inflationary could impact US yields, dealers said. The Union Budget in February and the Monetary Policy Committee's meeting after that are the next major domestic cues for traders.

The movement in crude oil prices and the rupee against the dollar may also lend direction. The swap rate in the one-year segment is seen at 6.38-6.50% and in the five-year segment at 6.16-6.25%. On Tuesday, the one-year swap rate ended at 6.43% and the five-year swap rate closed at 6.19%.

CALL 

On Wednesday, the one-day call money rate may open above the RBI's repo rate of 6.50% due to the demand for funds from banks early in the day to meet their reserve requirements.

The RBI will conduct an overnight, variable rate repo auction for 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. On Tuesday, the one-day call rate ended at 5.75%.

RBI AUCTION

--RBI to auction 91-day T-bills worth INR 120 billion

--RBI to auction 182-day T-bills worth INR 80 billion

--RBI to auction 364-day T-bills worth INR 80 billion

--RBI to conduct an overnight variable rate repo auction for INR 1.25 trillion at 1000-1030 IST.

LIQUIDITY

--Total net outflows are INR 165.07 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 6.24 billion as coupon on state bonds

--INR 3.69 billion as coupon on 7.37% 2054 gilt

* Outflows

--INR 175.00 billion payment on state bonds

--INR 719.00 billion on redemption of overnight 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 Deepshikha Bhardwaj

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