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Informist, Friday, Feb. 14, 2025

MUMBAI – On Saturday, the two-day call rate may open around the repo rate on demand for funds from banks. Government bonds and overnight indexed swap rates are not traded on Saturday.

The two-day call is seen moving in a range of 5.75%-6.25% on Saturday, dealers said. On Monday, the Reserve Bank of India will conduct an overnight variable rate repo auction for a notified amount of INR 1.00 trillion at 1000-1030 IST, and a four-day VRR for a notified amount of INR 750 billion at 1100-1130 IST. On Friday, the three-day call rate ended at 5.80%.

GOVERNMENT BONDS

On Monday, prices of bonds, especially of those maturing within 15 years, are likely to open higher, after the RBI doubled the size of its open market auction purchase to be held on Thursday.

However, the rise in prices may be temporary, and could be offset by RBI's lack of on-screen bond purchases in the week ended Feb. 7. This is the first time it has not bought gilts in the secondary market since the week ended Jan. 10; in the three weeks between, the RBI bought INR 388.15 billion through screen-based purchases.

Bond prices are likely to take cues from the movement of US Treasury yields over the weekend. US markets are shut on Monday for Presidents' Day. Market participants will closely assess statements by US President Donald Trump on tariffs and their potential impact on global trade.

Traders await any additional measures by the RBI to ease the liquidity deficit in the banking system. Crude oil prices could also be a trigger if they move significantly, dealers said. The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.67-6.75% for the day. On Friday, the bond settled at INR 100.57, or 6.71% yield.

OIS RATES

On Monday, overnight indexed swap rates may take cues from the movement of US Treasury yields. Market participants will closely assess any statements by US President Trump on tariffs and their potential impact on global trade, dealers said. 

Traders await any additional measures by the RBI to ease the liquidity deficit in the banking system. The liquidity deficit in the banking system is expected to widen further due to continued dollar sales by the RBI in the foreign exchange market as it tries to protect the rupee. Short-term swaps will take cues from the movement in the overnight MIBOR rate, which has been set well above the repo rate of 6.25% since the rate cut last week. 

Crude oil prices could also be a trigger if they move significantly, dealers said. The one-year swap rate is seen at 6.24-6.36% and the five-year rate is seen at 6.02-6.18%. On Friday, the one-year swap rate ended at 6.30% and the five-year swap rate closed at 6.09%.

RBI AUCTION

--Nil

LIQUIDITY

--Total net inflows are INR 109.74 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 14.68 billion as coupon on state bonds

--INR 40.72 billion as coupon on 8.24%, 2027 gilt

--INR 54.34 billion as coupon on 8.28%, 2032 gilt

* Outflows

--Nil

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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