India Money Market Outlook
Gilts, swaps seen taking cues from US yields Thu
This story was originally published at 20:27 IST on 25 February 2025
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MUMBAI – Government bond prices and overnight indexed swap rates may take cues from the movement in US Treasury yields on Thursday, dealers said. Money markets are shut on Wednesday on the occasion of Mahashivratri. Traders are waiting for India's GDP data for Oct-Dec which will be released on Friday.
Gilts and swap rates may also take cues from the INR-330-billion Treasury bill auction Thursday. The RBI rejected all bids for the 91-day and 182-day Treasury bills at the previous weekly auction, which was a boost to systemic liquidity. Any such outcome Thursday would lend cues to swap rates, dealers said.
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. Any sharp movement of the rupee against the dollar could also give cues to bonds and swaps after the domestic currency slid 0.6% to close at 87.2100 per dollar on Tuesday from its previous close of 86.6950 per dollar.
On Thursday, the one-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%.
GOVERNMENT BONDS
On Thursday, government bonds are likely to take cues from the movement in US Treasury yields. Prices may remain in a narrow range till Friday as traders will wait for India's GDP data for cues on domestic rate cuts, dealers said.
Traders will also remain cautious awaiting cues on further bond purchases by the RBI, dealers said. Any measures on further liquidity infusion by the central bank will be positive for shorter-tenure bonds, they said.
The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.68-6.75% during the day. On Tuesday, the bond settled at INR 100.58, or 6.71% yield.
OIS RATES
On Thursday, swap rates may take cues from the movement in US Treasury yields. Any major geopolitical developments may also lend cues.
Short-term swaps will take cues from the 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. Traders await the India GDP data on the domestic front and the slew of comments and speeches by US Federal Reserve officials and US inflation data on the global front this week. Swap rates may also track the movement of bond prices during the day. A further rally in short-term bonds could translate to a fall in swap rates.
The one-year swap rate is seen at 6.22-6.30% and the five-year rate is seen at 5.99-6.06%. On Tuesday, the one-year swap rate ended at 6.26% and the five-year swap rate closed at 6.02%.
CALL
On Thursday, the one-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 Tuesday, the two-day call rate ended at 5.90%.
RBI AUCTION
--RBI to auction 91-day Treasury bills worth INR 140 billion on Thursday
--RBI to auction 182-day T-bills worth INR 120 billion on Thursday
--RBI to auction 364-day T-bills worth INR 70 billion on Thursday
--RBI to hold overnight VRR auction for INR 500 billion 1000-1030 IST Thursday
LIQUIDITY
--Total net outflows of INR 46.69 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 8.94 billion as coupon on state bonds on Wednesday
--INR 170.00 billion on redemption of 91-day T-bills on Thursday
--INR 61.46 billion on redemption of 182-day T-bills on Thursday
--INR 90.09 billion on redemption of 364-day T-bills on Thursday
--INR 23.35 billion as coupon on state bonds on Thursday
--INR 10.00 billion on redemption of state bonds on Thursday
* Outflows
--INR 410.54 billion as payment on state bonds on Thursday
--INR 750.12 billion on reversal of two-day variable rate repo tender
End
US$1 = INR 87.21
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Reported by Srijita Bose
Edited by Saji George Titus
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