India Money Market Outlook
Gilts may open steady ahead of weekly auction
This story was originally published at 20:37 IST on 23 January 2025
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MUMBAI – On Friday, government bond prices may open steady ahead of the weekly gilt auction for INR 320 billion at 1030-1130 IST, dealers said. Gilt prices and overnight indexed swaps will also take cues from the overnight movement of US Treasury yields following the release of the US data on weekly unemployment claims which was at 223,000 for the week ended Saturday, up from 217,000 in the previous week.
Any new announcements by US President Donald Trump may also give cues to gilts, dealers said. Any major geopolitical developments and a further rise in crude oil prices could also lend cues to gilt prices and overnight indexed swap rates at the opening.
On Friday, the three-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.
GOVERNMENT BONDS
On Friday, bond prices may open steady on caution ahead of the gilt auction at 1030-1130 IST. The government will sell INR 220 billion of the 6.79%, 2034 gilt and INR 100 billion of the 7.09%, 2074 gilt.
Prices may also take cues from US yields after the release of US data on weekly unemployment claims. Any new announcements by Trump may also give cues to gilts, dealers said. Any geopolitical triggers or a further rise in crude oil prices may also impact gilt prices.
Prices of gilts will also be sensitive to the movement in the Indian rupee against the dollar. Gilt traders will also await any measures by the RBI to improve durable liquidity in the banking system, dealers said.
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 100.38, or 6.73% yield.
OIS RATES
On Friday, swap rates will take cues from the movement in US yields, dealers said. The Union Budget in February and the MPC's meeting after that are the next major domestic cues for traders.
The release of data on weekly unemployment claims in the US could also give direction to US yields overnight. US jobless claims for the week ended Saturday rose slightly from the previous week.
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 Thursday, the one-year swap rate ended at 6.41% and the five-year swap rate closed at 6.18%.
CALL
On Friday, the three-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. During the day, the call rate is seen in a range of 6.00-6.70%, dealers said. On Thursday, the one-day call rate ended at 6.00%.
RBI AUCTION
--Government to sell two gilts worth INR 320 billion
--RBI to conduct a three-day variable rate repo auction for INR 2.00 trillion
--RBI to conduct a 14-day variable rate repo auction for INR 1.75 trillion
LIQUIDITY
--Total net inflows of INR 166.02 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 61.75 billion as coupon on 7.18%, 2037 gilt
--INR 7.61 billion as coupon on state bonds
--INR 96.66 billion for payment for gilts bought back by the government
* Outflows
--INR 2.25 trillion redemption on 14-day variable rate repo tender
--INR 1.25 trillion redemption on 1-day variable rate repo tender
--INR 206.68 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 Saji George Titus
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