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Informist, Wednesday, Feb. 5, 2025

MUMBAI – Government bond prices may remain higher and overnight indexed swap rates lower on Thursday on expectations of a rate cut by the Reserve Bank of India's Monetary Policy Committee on Friday. At open, gilts and swaps may also take cues from the overnight movement of US Treasury yields after the release of the US ADP National Employment Report for January, dealers said.

Gilts and swaps may also be sensitive to the rupee's movement against the dollar after it touched a record low of 87.4900 a dollar on Wednesday. Fluctuations in crude oil prices and US President Donald Trump's comments on tarfiffs may also lend cues, dealers said.

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 reserve requirements. During the day, the call rate is seen in a range of 6.00-6.70%, dealers said.

GOVERNMENT BONDS

On Thursday, gilt prices may track US yields at the open, dealers said. Prices may remain higher on expectations of a repo rate cut by the MPC on Friday.  

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.64-6.70% during the day. On Wednesday, the bond settled at INR 100.89, or 6.66% yield.

OIS RATES

On Thursday, swap rates may take cues from the overnight movement of US Treasury yields after the release of the US ADP National Employment Report for January. Short-term swaps may fall further if the liquidity conditions improve, dealers said. 

Traders will also await the US employment report for January, due post-market hours Friday, for non-farm payrolls data for cues on further rate cuts by the US Federal Open Market Committee.

The swap rate in the one-year segment is seen at 6.23-6.40% and in the five-year segment at 6.00-6.15%. On Wednesday, the one-year swap rate ended at 6.31% and the five-year swap rate closed at 6.06%.

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 reserve requirements. The RBI will conduct an overnight variable rate repo operation for INR 250.00 billion 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 5.75%.

RBI AUCTION

--RBI to hold overnight VRR auction for INR 250 bln 1000-1030 IST

LIQUIDITY

--Total net outflows are INR 18.64 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 83.00 billion on redemption of 91-day Treasury bills

--INR 75.00 billion on redemption of 182-day T-bills

--INR 95.90 billion on redemption of 364-day T-bills

--INR 54.45 billion as coupon on 7.26%, 2033 gilt

--INR 26.61 billion as coupon on state bonds

* Outflows

--INR 185.00 billion as payment on 91-day T-bills

--INR 87.00 billion as payment on 182-day T-bills

--INR 81.60 billion as payment on 364-day T-bills

--INR 211.80 billion on reversal of overnight variable rate repo tender

End

US$1 = INR 87.47

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

Reported by Sriita Bose

Edited by Saji George Titus

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