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Informist, Thursday, Feb. 13, 2025

MUMBAI – On Friday, government bond prices and overnight indexed swap rates will take cues from the overnight movement of US Treasury yields after the release of the US producer prices data for January and weekly jobless claims for the week ended Saturday, dealers said. 

US producer prices rose 0.4% on month in January, against consensus estimates of 0.3%. US jobless claims fell by 7,000 to 213,000 in the week ended Saturday, against consensus estimates of 215,000. Market participants will closely assess any statements by US President Donald Trump on tariffs and their potential impact on global trade, especially at his meeting with Indian Prime Minister Narendra Modi. The two heads of governments will address a press conference at 0330 IST Friday.

Gilts and swaps may also take cues from the movement of the rupee against the dollar. Crude oil prices may also be a trigger, dealers said. Traders await any additonal measures by the RBI to ease the liquidity deficit in the banking system.

On Friday, the three-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.

GOVERNMENT BONDS

On Friday, gilt prices are likely to take cues from the overnight movement of US Treasury yields after the US January producer price index and weekly jobless claims for the week ended Saturday, which were both due at 1900 IST.

On the domestic front, bond traders will take cues from the INR 390 billion weekly gilt auction at 1030-1130 IST. The government will sell INR 70 billion of the 6.64%, 2027 bond, INR 220 billion of the 6.79%, 2034 bond and INR 100 billion of the 7.09%, 2074 bond. This will the benchmark 10-year gilt's last scheduled auction for this financial year, and traders placed short bets on the gilt this week to pick up auction stock. The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.67-6.75% for the day. On Thursday, the bond settled at INR 100.55, or 6.71% yield.

OIS RATES

OIS rates will take cues Friday from the movement of US Treasury yields after the US January producer price index and weekly jobless claims for the week ended Saturday, which were both released at 1900 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 Thursday, the one-year swap rate ended at 6.33% and the five-year swap rate closed at 6.14%.

CALL

On Friday, the three-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 Thursday, the one-day call rate ended at 5.80%.

RBI AUCTION

--RBI to hold 3-day VRR auction for INR 1.50 trillion 1000-1030 IST

--Govt to auction two gilts worth INR 390 billion

LIQUIDITY

--Total net inflows are INR 154.33 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 70.00 billion as redemption on 182-day T-bills

--INR 72.16 billion as coupon on 7.18%, 2033 gilt

--INR 12.18 billion as coupon on state bonds

* Outflows

--INR 2.36 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 Deepshikha Bhardwaj

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