India Money Market Outlook
Gilts, swaps seen steady before India GDP Fri
This story was originally published at 21:22 IST on 27 February 2025
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MUMBAI – On Friday, government bond prices and overnight indexed swap rates may remain steady before the release of India GDP print for Oct-Dec, along with the second advance estimate for the financial year 2024-25 (Apr-Mar), scheduled at 1600 IST, dealers said. According to a poll of 16 economists by Informist, GDP growth is expected to have risen to 6.3% in the final quarter of 2024. A sharp movement in US Treasury yields could lend cues to gilts and swaps at opening.
Gilts and swap rates may also take cues from the INR-320-billion gilt auction Friday. This is the last scheduled gilt auction during the financial year ending Mar. 31.
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. A sharp movement of the rupee against the dollar could also give cues to bonds and swaps.
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%.
GOVERNMENT BONDS
On Friday, government bonds might open steady as traders will wait for GDP data for cues, dealers said. Traders may also be cautious ahead of the gilt auction. Dealers will also await cues on further bond purchases by the RBI, dealers said. Any measures on further liquidity infusion by the central bank will also be a positive for shorter-tenure bonds, they said.
The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.65-6.75% during the day. On Thursday, the bond settled at INR 100.56, or 6.71% yield.
OIS RATES
On Friday, swap rates may take cues from the overnight movement in US Treasury yields. Rates may remain steady as dealers will take cues from India's Oct-Dec GDP data as it could cue further repo rate cuts by Reserve Bank of India's Monetary Policy Committee.
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. 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.
Offshore traders may also remain on the sidelines ahead of the release of US inflation data post market hours on Friday. They will wait for cues on further rate cuts by the FOMC.
The one-year swap rate is seen at 6.18-6.30% and the five-year rate is seen at 5.95-6.06%. On Thursday, the one-year swap rate ended at 6.27% and the five-year swap rate closed at 6.02%.
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 5.85%.
RBI AUCTION
--Govt to auction three gilts worth INR 320 billion on Friday
--RBI to hold 3-day VRR auction for INR 250 billion 1000-1030 IST Friday
LIQUIDITY
--Total net outflows of INR 340.49 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 59.38 billion as coupon on 7.95%, 2032 gilt
--INR 10.92 billion as coupon on state bonds
* Outflows
--INR 201.00 billion as payment on 91-day Treasury bills
--INR 137.51 billion as payment on 182-day T-bills
--INR 72.28 billion as payment on 364-day T-bills
--INR 499.55 billion on reversal of one-day variable rate repo tender
End
US$1 = INR 87.20
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Reported by Srijita Bose
Edited by Deepshikha Bhardwaj
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