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Informist, Friday, Feb. 7, 2025

MUMBAI – On Monday, government bond prices and overnight indexed swap rates may take cues from the movement of US Treasury yields after the US employment report for January and non-farm payrolls data for cues on further rate cuts by the US Federal Open Market Committee.

Data released on Friday showed non-farm payrolls rose by 143,000 in January, lower than the 170,000 projected by an FX Street poll. The unemployment rate fell to 4.0%, the U.S. Bureau of Labor Statistics reported. 

Gilts and swaps may also take cues from the movement of the rupee against the dollar, as well US President Donald Trump's comments on political and economic measures. Crude oil prices may also be a trigger, dealers said.

On Monday, the one-day call rate may open above the repo rate due to demand for funds from banks early in the day. During the day, the call rate is seen in a range of 5.75-6.35%, dealers said.

GOVERNMENT BONDS

Gilts are not traded on Saturday. On Monday, gilt prices may take cues from the movement of US yields. Prices may fall further on Monday should the disappointment from the lack of liquidity measures by the Reserve Bank of India linger, though losses will be limited after the rate cut.

Traders may pick up bonds as funding costs ease sustainably towards the new 6.25% repo rate, which will make spreads across the yield curve more attractive.

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.65-6.75% during the day. On Friday, the bond settled at INR 100.59, or 6.70% yield.

OIS RATES

OIS rates are not traded on Saturday. On Monday, short-term swaps may fall further if the RBI announces measures to boost liquidity conditions, they said. 

The swap rate in the one-year segment is seen at 6.30-6.40% and in the five-year segment at 6.07-6.17%. On Friday, the one-year swap rate ended at 6.35% and the five-year swap rate closed at 6.12%.

CALL

On Monday, the one-day call rate may open above the repo rate due to demand for funds from banks early in the day. The RBI will conduct an overnight variable rate repo auction for INR 2.25 trillion at 1000-1030 IST.

During the day, the call rate is seen in a range of 5.75-6.35%, dealers said. On Friday, the 3-day call rate ended at 5.75%.

RBI AUCTION

--RBI to hold overnight VRR auction for INR 2.25 tln 1000-1030 IST Mon

LIQUIDITY

--Total net outflows are INR 128.70 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 16.88 billion as coupon on state bonds on Saturday

--INR 23.19 billion as coupon on state bonds on Sunday

--INR 9.73 billion as coupon on state bonds on Monday

--INR 41.49 billion as coupon on 7.50%, 2034 gilt on Monday

* Outflows

--INR 220.00 billion as payment on gilts on Monday

--INR 1.33 trillion on reversal of 3-day variable rate repo tender on Monday

End

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

Reported by Srijita Bose

Edited by Saji George Titus

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