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Informist, Friday, Feb. 28, 2025

MUMBAI – On Saturday, the two-day call rate may open around the repo rate due to demand for funds from banks. As is generally the case on working Saturdays, volume is expected to remain low with banks having already fulfilled their funding requirements on Friday, dealers said.

During the day, the call rate is seen in a range of 5.75% to 6.25%. On Friday, the three-day call rate ended at 6.50%.

GOVERNMENT BONDS

Gilts are not traded on Saturday. On Monday, government bonds will likely take cues from the movement of US Treasury yields, dealers said. US inflation data that is due later Friday will lend direction to the US yields and provide cues on rate cut by US Federal Open Market Committee.

Dealers will also look for cues on further bond purchases by the Reserve Bank of India, dealers said. Any measures on further liquidity infusion by the central bank will be a positive for shorter-tenure bonds, they 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. The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.68-6.75% during the day. On Friday, the bond settled at INR 100.42, or 6.73% yield.

OIS RATES

Overnight indexed swaps are not traded on Saturday. On Monday, swap rates may take cues from the overnight movement in US Treasury yields after the US inflation data. Traders will wait for cues on further rate cuts by the FOMC.

Swap rates may also track the movement of bond prices during the day. Short-term swaps will take cues from overnight borrowing rates, which have been well above the repo rate of 6.25% since the repo rate cut on Feb. 7.

Market participants will closely assess any statements by 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 swaps. 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 Friday, the one-year swap rate ended at 6.26% and the five-year swap rate closed at 6.01%.

RBI AUCTION

--Nil

LIQUIDITY

--Total net inflows of INR 3.92 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 3.92 billion as coupon on state bonds

* Outflows
--Nil

End

Reported by Srijita Bose

Edited by Ashish Shirke

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