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Informist, Thursday, Feb. 20, 2025

MUMBAI – Government bond prices and overnight indexed swap rates will take cues Friday from movement in US Treasury yields after the release of weekly jobless claims in the US for the week ended Saturday, dealers said. The claims rose by 5,000 to 219,000, against a Dow Jones poll estimate of 215,000.

Traders also await the minutes of the Monetary Policy Committee's February meeting, due Friday, but since the voting was unanimous, there may not be any significant takeaways, dealers said. Traders will pay closer attention to the Reserve Bank of India's weekly statistical supplement for data on whether the RBI bought gilts on-screen in the week ended Friday. 

Delayed reactions to the rejection of the 91-day and 182-day T-bills may cause a rise in short-term bond prices and a fall in short-term swap rates, dealers said. Some positivity may persist with the RBI announcing three variable rate repo operations Friday.

The RBI will conduct a 45-day variable rate repo auction for a notified amount of INR 750.00 billion between 1200 IST and 1230 IST Friday. The central bank will also conduct a three-day variable rate repo auction worth INR 1.75 trillion as part of its daily auctions, and a 14-day variable rate repo auction worth INR 750.00 billion to ease liquidity in the banking system. Bets on the RBI announcing another round of auctions under its open market operations Friday may lead to traders picking up gilts, dealers said.

Geopolitical developments and US trade policy may also lend cues. Gilts and swaps may also take cues from the movement of the rupee against the dollar. Crude oil prices may be another trigger, dealers said. 

On Friday, the three-day call rate may open around the repo rate on demand for funds from banks. During the day, the call rate is seen in the range of 5.75%-6.40%, dealers said.

GOVERNMENT BONDS

On Friday, government bonds are likely to take cues from the movement of US Treasury yields after the release of weekly jobless claims in the US, dealers said. Traders may be cautious ahead of the INR 340-billion gilt auction.

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.64-6.74% during the day. On Thursday, the bond settled at INR 100.59, or 6.70% yield.

OIS RATES

On Friday, swap rates may take cues from the movement in US Treasury yields after the release of initial jobless claims in the US for the week ended Saturday, dealers said. Short-term swaps will take cues from movement in the overnight Mumbai Interbank Offer Rate, which has been set well above the repo rate of 6.25% since the repo rate cut on Feb. 7.

The one-year swap rate is seen at 6.24-6.36% and the five-year rate is seen at 6.02-6.15%. On Thursday, the one-year swap rate ended at 6.30% and the five-year swap rate closed at 6.08%.

CALL

On Friday, the three-day call rate may open around the repo rate on demand for funds from banks. During the day, the call rate is seen in the range of 5.75-6.40%. On Thursday, the one-day call rate ended at 5.75%.

RBI AUCTION

--RBI to hold three-day VRR auction for INR 1.75 tln 1000-1030 IST 

--RBI to hold 14-day VRR auction for INR 750 bln 1100-1130 IST 

--RBI to hold 45-day VRR auction for INR 750 bln 1200-1230 IST

--Govt to auction three gilts worth INR 340 billion

LIQUIDITY

--Total net inflows are INR 460.78 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 124.00 billion as redemption of 91-day T-bills

--INR 7.15 billion as coupon on state bonds

--INR 400.00 billion as payment from Thurday's OMO buy auction

* Outflows
--INR 70.36 billion as payment for 364-day T-bills

--INR 574.13 billion as reversal of 4-day variable rate repo tender

--INR 1.00 trillion as reversal of overnight variable rate repo tender

--INR 329.16 billion 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 Rajeev Pai

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