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Informist, Saturday, Mar. 1, 2025

MUMBAI – On Monday, government bonds and overnight indexed swap rates will likely take cues from the movement in the US Treasury yields following the release of US economic data on inflation, dealers said. The US core personal consumption expenditures price index in January rose 0.3% from December, data showed on Friday post market hours. 

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 in the rupee against the dollar could also give cues to both gilts and swaps.

The one-day call money rate may open above the RBI's repo rate of 6.25% due to demand for funds from banks early in the day to meet their reserve requirements. On Saturday, the two-day call rate ended at 5.75%.

GOVERNMENT BONDS

Government bonds will likely take cues from the movement of US Treasury yields, dealers said. US inflation data released on 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 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.

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%.

CALL

The one-day call money rate may open above the RBI's repo rate of 6.25% due to demand for funds from banks early in the day to meet their reserve requirements. During the day, the call rate is seen in a range of 5.75-6.40%, dealers said.

RBI AUCTION

--RBI to hold overnight variable rate repo auction for INR 250 billion 1000-1030 IST

LIQUIDITY

--Total net outflows of INR 456.20 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 26.38 billion as coupon on state bonds

* Outflows

--INR 320.00 billion as payment for gilts

--INR 162.58 billion as reversal of 3-day variable rate repo tender

End

Reported by Vidhushi Rajpurohit and Vaishali Tyagi

Edited by Akul Nishant Akhoury

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