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Informist, Wednesday, Jan. 22, 2025

MUMBAI – Government bond prices and overnight indexed swap rates will take cues from overnight movement of US Treasury yields. Any comment by US President Donald Trump or measures that are seen as inflationary could impact US yields, dealers said.

The movement in crude oil prices and the rupee against the dollar may also lend direction to both gilts and swaps. The Union Budget in February and the Reserve Bank of India's Monetary Policy Committee meeting after that are the next major domestic cues for traders.

On Thursday, 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 Thursday, bond prices will react to the movement in US yields. Any announcement on tariffs and taxes by US President Trump will also provide cues to gilts, dealers said. They expect some short selling ahead of the weekly gilt auction on Friday. 

Gilts prices will also take cues from the result of the buyback auction on Thursday. The government will buy back five gilts worth INR 200 billion on Thursday at 1030-1130 IST. During the day, prices of gilts will also be sensitive to the movement of the Indian rupee against the dollar, dealers said. 

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.70-6.79% during the day. On Wednesday, the bond settled at INR 100.46, or 6.72% yield.

OIS RATES

On Thursday, swap rates will take cues from the movement in US yields. Any comment by US President Trump or measures that are seen as inflationary could impact US yields, dealers said. 

The swap rate in the one-year segment is seen at 6.35-6.47% and in the five-year segment at 6.13-6.23%. On Wednesday, the one-year swap rate ended at 6.40% and the five-year swap rate closed at 6.17%.

CALL 

On Thursday, 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, 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 Wednesday, the one-day call rate ended at 6.20%.

RBI AUCTION

--Government to buy back INR 200 billion worth of 5 gilts on Thursday 

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

LIQUIDITY

--Total net outflows are INR 658.71 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 331.51 billion on redemption of 91-day Treasury bills 

--INR 66.55 billion on redemption of 182-day T-bills

--INR 116.66 billion on redemption of 364-day T-bills 

--INR 6.67 billion as coupon on state bonds

* Outflows

--INR 194.00 billion as payment of 91-day T-bills

--INR 895.84 billion as payment of 182-day T-bills

--INR 90.25 billion as payment of 364-day T-bills

--INR 1.25 trillion on payment of overnight 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 Avishek Dutta

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