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Informist, Friday, Jan. 24, 2025

MUMBAI – Money markets are shut on Saturday. Government bond prices may rise on Monday as data released after market hours showed the Reserve Bank of India bought gilts through screen-based open market purchases in the week ended Jan. 17, dealers said.

The central bank bought INR 101.75 billion worth of bonds outside auction in the Jan. 17 week, the largest gross purchases since September 2021 and the largest non-auction buys since April of that year. Traders have been keenly watching for the RBI's measures to infuse durable liquidity into the banking system at a time when its dollar sales to support the rupee's slide have tightened liquidity conditions.

Overnight indexed swap rates are seen taking cues from the movement in US Treasury yields at the open on Monday. With a repo rate cut in February priced in, short-term swaps may have limited room to fall further, dealers said. The policies of new US President Donald Trump and the movement in crude oil prices may also lend direction to both gilts and swap rates.

On Monday, the one-day call rate may open above the repo rate of 6.50% on demand for funds from banks. During the day, the call rate is seen in a range of 6.00-6.90%, dealers said.

GOVERNMENT BONDS

The gilt market is shut on Saturdays. On Monday, bond prices may open higher after data showed the RBI bought INR 101.75 billion in the week ended Jan. 17, its largest bond purchase outside an open market auction since April 2021.

Traders look ahead to the Union Budget on Feb. 1 and the RBI's Monetary Policy Committee meeting the week after are the next major domestic cues. Prices may rise further due to optimism on both interest rate cuts and lower bond supply in 2025-26 (Apr-Mar) from the current financial year, dealers said.

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.65-6.73% during the day. On Friday, the bond settled at INR 100.48, or 6.72% yield.

OIS RATES

Swaps are not traded on Saturday. On Monday, 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 swap rate in the one-year segment is seen at 6.33-6.44% and in the five-year segment at 6.08-6.20%. On Friday, the one-year swap rate ended at 6.36% and the five-year swap rate closed at 6.13%.

CALL 

On Monday, the one-day call rate may open above the repo rate of 6.50% on demand for funds from banks. During the day, the call rate is seen in a range of 6.00-6.90%, dealers said. On Friday, the three-day call rate ended at 6.40%.

RBI AUCTION

--RBI to conduct an overnight variable rate repo auction for INR 2.00 trillion

LIQUIDITY

--Total net outflows of INR 265.59 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 17.41 billion as coupon on state bonds on Saturday

--INR 115.15 million as coupon on floating rate bond, 2035 on Saturday

--INR 7.26 billion as coupon on state bonds on Sunday

--INR 16.37 billion as coupon on state bonds on Monday

--INR 2.84 billion as coupon on 7.10%, 2028 green bond on Monday

--INR 2.92 billion as coupon on 7.29%, 2033 green bond on Monday

--INR 7.50 billion on redemption of state bonds on Monday

* Outflows

--INR 320.00 billion as payment for gilts on Monday

--INR 2.00 trillion 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 Akul Nishant Akhoury

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