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Informist, Tuesday, Feb. 11, 2025

MUMBAI – On Wednesday, government bond prices and overnight indexed swap rates are likely to take cues from the overnight movement of US Treasury yields ahead of US CPI inflation for January and after US Federal Reserve Board Chair Jerome Powell's submission of the Monetary Policy Report to US Senate Banking Committee, dealers said.

Traders will likely be cautious ahead of India's CPI inflation for January, which will be detailed at 1600 IST. Consumer inflation is seen at a five-month low of 4.5% in January, driven by a sharp fall in vegetable prices, according to an Informist poll of 12 economists. Swap and gilt traders have priced in a reading of 4.4-4.5%, and bonds and swaps may react only if the print is beyond this range.

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

On Wednesday, the one-day call money rate may open above the Reserve Bank of India's repo rate of 6.25% 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 5.75-6.40%, dealers said.

GOVERNMENT BONDS

When the market opens on Wednesday, bonds are likely to take cues from the overnight movement of US Treasury yields, dealers said. The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.65-6.75% during the day. On Tuesday, the bond settled at INR 100.63, or 6.70% yield.

OIS RATES

On Wednesday, swap rates will take cues from the overnight movement of US Treasury yields after US Federal Reserve Board Chair Jerome Powell presents Monetary Policy Report to US Senate Banking Committee at 2030 IST.

The one-year swap rate is seen at 6.31-6.41% and the five-year rate is seen at 6.09-6.19%. On Tuesday, the one-year swap rate ended at 6.36% and the five-year swap rate closed at 6.14%.

CALL

On Wednesday, the one-day call money rate may open above the RBI's repo rate of 6.25% due to demand for funds from banks early in the day to meet reserve requirements. During the day, the call rate is seen in the range of 5.75-6.40%, dealers said. On Tuesday, the one-day call rate ended at 6.33%.

RBI AUCTION

--RBI to hold overnight VRR auction for INR 2.50 trillion 1000-1030 IST

--RBI to auction 91-day T-bills worth INR 120 billion

--RBI to auction 182-day T-bills worth INR 80 billion

--RBI to auction 364-day T-bills worth INR 80 billion

LIQUIDITY

--Total net outflows are INR 173.44 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 9.75 billion as coupon on state bonds

* Outflows

--INR 183.19 billion as payment for state bonds

--INR 2.00 trillion as reversal of overnight variable rate repo tender

End

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

Reported by Cassandra Carvalho

Edited by Ashish Shirke

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