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Informist, Thursday, Mar. 6, 2025

MUMBAI – On Friday, government bond prices are likely to open higher after the Reserve Bank of India detailed the bonds it will buy at Wednesday's open market gilt purchase auction, dealers said. The RBI will buy six bonds--the 7.10%, 2029 gilt, 7.18%, 2033 gilt, 7.10%, 2034 gilt, 7.40%, 2035 gilt, 7.41%, 2036 gilt, and 7.23%, 2039 gilt--at the auction.

Gilts and swap rates may take cues at the opening from overnight movement in US Treasury yields after the release of US unemployment claims for the week ended Saturday, dealers said. Data released at 1900 IST showed that jobless claims dropped to 221,000 for the week against 235,000 expected by Dow Jones. Traders may show some caution before the release of US non-farm payrolls data Friday, dealers said.

Market participants will assess any statements by US President Donald Trump and developments related to US tariff policy. A possible global trade war following Trump's imposition of tariffs could fuel a rise in inflation and cause central banks across the globe to refrain from cutting rates. On the other hand, the impact of these policies on growth could also increase the pressure on these banks to cut rates further. The actions of the US Federal Reserve may become crucial as Canada, Mexico, and China are the top trading partners of the US, which means tariffs on these three countries will immediately affect prices in the world's largest economy.

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

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% and the triparty repo rate in the range of 5.75-6.25%.

GOVERNMENT BONDS

On Friday, gilt prices are likely to open higher after the RBI detailed the bonds it will buy at the OMO auction, dealers said. The bonds to be auctioned next week are expected to see good buying interest from traders during the day. Other short-tenure bonds are also expected to remain in favour because of the RBI's proactive measures to boost systemic liquidity, dealers said. 

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.65-6.73% during the day. On Wednesday, the bond settled at INR 100.56, or 6.71% yield. 

OIS RATES

On Friday, swap rates may take cues at the opening from the overnight movement in US Treasury yields after the release of US unemployment claims for the week ended Saturday, dealers said. Swap rates may also track the movement of government bond yields during the day. Short-term swaps may fall more during the day due to the RBI's liquidity measures and tracking the movement in overnight Mumbai Interbank Offer Rate--the floating leg of the OIS contract.

The one-year swap rate is seen at 6.16-6.26% and the five-year rate is seen at 5.90-6.04%. On Thursday, the one-year swap rate ended at 6.20% and the five-year swap rate closed at 5.96%.

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% and the triparty repo rate in 5.75-6.25%. On Thursday, the one-day call rate ended at 5.75%.

RBI AUCTION

--RBI to hold 3-day VRR auction for INR 250 billion 1000-1030 IST 

--RBI to hold 14-day VRR auction for INR 500 billion 1100-1130 IST 

LIQUIDITY

--Total net inflows of INR 5.46 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 5.46 billion as coupon on state bonds

* Outflows
--INR 410.46 billion as reversal of 14-day variable rate repo tender

--INR 44.42 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 Rajeev Pai

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