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Informist, Monday, Feb. 24, 2025

MUMBAI – On Tuesday, government bond prices and overnight indexed swap rates are likely to take cues from the overnight movement of US Treasury yields, dealers said. Traders are waiting for India's GDP data for Oct-Dec that will be released on Friday.

Any major geopolitical developments may also lend cues. Traders are also waiting for speeches by US Federal Reserve officials and US inflation data this week. 

Market participants will closely assess any statements by US President Donald Trump on tariffs and their potential impact on global trade. Crude oil prices could also be a trigger if they move significantly, dealers said.

On Tuesday, the two-day call rate may open around the repo rate on demand for funds from banks. During the day, the call rate is seen in a range of 5.75%-6.40%.

GOVERNMENT BONDS

On Tuesday, government bonds are likely to take cues from the overnight movement of US Treasury yields. Prices may remain in a narrow range till Friday as traders will wait for GDP data for cues, dealers said.

Traders will also look for cues on further bond purchases by the Reserve Bank of India, dealers said. Long-term bonds may fall after the RBI revised Tuesday's state-bond auction to INR 410.54 billion from INR 380.54 billion earlier, they said.

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.68-6.75% during the day. On Monday, the bond settled at INR 100.60, or 6.70% yield.

OIS RATES

On Tuesday, swap rates may take cues from the movement of US Treasury yields. Short-term swaps will track the movement of overnight MIBOR rate, which has been set well above the repo rate of 6.25% since the policy rate was cut on Feb. 7. Swap rates may also track the movement of bond prices during the day.

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 Monday, the one-year swap rate ended at 6.27% and the five-year swap rate closed at 6.04%.

CALL

On Tuesday, the two-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 Monday, the one-day call rate ended at 5.80%.

RBI AUCTION

--Seventeen states to raise INR 410.54 bln through bond sale on Tuesday

--RBI to hold 2-day VRR auction for INR 750 billion 1000-1030 IST Tuesday 

LIQUIDITY

--Total net inflows of INR 170.61 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 21.14 billion as coupon on state bonds 

--INR 149.46 billion on redemption of state bonds

* Outflows
--INR 367.75 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 Srijita Bose

Edited by Ashish Shirke

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