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Informist, Tuesday, Mar. 4, 2025

MUMBAI – On Wednesday, government bond prices and overnight indexed swap rates may take cues from the overnight movement in US Treasury yields after US tariffs on Canada, Mexico, and China came into effect Tuesday, dealers said.

Market participants will closely assess any statements by US President Donald Trump on tariffs and their potential impact on global trade. The US has imposed 25% tariff on imports from Canada and Mexico, and additional 10% tariff on imports from China. A possible global trade war could ensue as China has slapped tariffs on the US. This could lead to rise in inflation, which could cause central banks across the globe to refrain from cutting rates. The actions of the US Federal Reserve may also become crucial as Canada, Mexico, and China are top exporters to the US.

Crude oil prices could also be a trigger for swaps if they move significantly, dealers said. A sharp movement of the rupee against the dollar could also give cues to gilts and swaps.

On Wednesday, 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 a range of 5.75% to 6.40%.

GOVERNMENT BONDS

On Wednesday, government bond prices may take cues from the overnight movement of US Treasury yields. Gilt prices may trade in a narrow range as domestic traders await clarity on whether the RBI would further infuse liquidity after its dollar/rupee buy/sell swap settled on Tuesday, dealers said. US unemployment claims in February on Thursday and non-farm payrolls on Friday will be the next triggers for gilts, 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 100.31, or 6.74% yield.

OIS RATES

On Wednesday, swap rates may take cues from the overnight movement in US Treasury yields, dealers said. Swaps may also track the movement of government bond yields during the day. Short-term swaps will take cues from liquidity conditions and their impact on the overnight Mumbai Interbank Overnight Rate – the floating leg of the OIS contract. The overnight MIBOR was set at 6.37% Tuesday, the lowest in nearly a month.

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 Tuesday, the one-year swap rate ended at 6.24% and the five-year swap rate closed at 6.00%.

CALL

On Wednesday, 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 a range of 5.75% to 6.40%. On Tuesday, the one-day call rate ended at 5.75%.

RBI AUCTION

--RBI to auction 91-day T-bills worth INR 140 bln on Wednesday

--RBI to auction 182-day T-bills worth INR 120 bln on Wednesday

--RBI to auction 364-day T-bills worth INR 70 bln on Wednesday

--RBI to hold overnight VRR auction for INR 250 billion 1000-1030 IST 

LIQUIDITY

--Total net outflows of INR 483.22 billion. The calculation of flows does not take into account the redemption of the standing deposit facility and scheduled variable rate repo and reverse repo operations.

* Inflows

--INR 21.78 billion as coupon on state bonds

* Outflows
--INR 505.00 billion on payment of state bonds

--INR 58.55 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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