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Informist, Monday, Mar. 10, 2025

MUMBAI – Government bond prices are likely to remain steady on Tuesday ahead of the INR 495.22-billion state bond auction, dealers said. Gilts and overnight indexed swap rates may also take cues from the movement of US Treasury yields at opening.

Traders may also take positions ahead of CPI data for February of India and the US on Wednesday. Market participants will 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 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 Tuesday, the one-day call rate may open above the repo rate on demand for funds from banks. During the day, the call rate is seen in a range of 5.75-6.40% and the triparty repo rate in 5.75-6.25%.

GOVERNMENT BONDS

Gilt prices are likely to remain steady on Tuesday ahead the state government securities auction, dealers said. States plan to raise INR 495.22 billion, which is much higher than mentioned in the indicative state borrowing calendar. Traders are likely to take cues from the auction outcome.

Tuesday will be the last day for traders to build their positions before the INR 500 billion open market gilt purchase auction on Wednesday. Traders may continue to buy bonds which the Reserve Bank of India has notified it will buy at the OMO auction. However, with most of the six bonds in the held-to-maturity portfolios of banks, trading activity may remain muted on account of the RBI's gilt buy, dealers said.

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.67-6.75% during the day. On Monday, the bond settled at INR 100.61, or 6.70% yield.

OIS RATES

When the market opens on Tuesday, swap rates may take cues from government bond yields and overnight movement of US Treasury yields. Later, swap rates may take cues from the result of the state bond auction, as demand for forward rate agreements may rise on purchase of long-term state bonds.

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 6.15-6.23% and the five-year rate is seen at 5.95-6.03%. On Monday, the one-year swap rate ended at 6.19% and the five-year swap rate closed at 5.99%.

CALL

On Tuesday, the one-day call rate may open above 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 Monday, the one-day call rate ended at 6.25%.

RBI AUCTION

--Twenty states to raise INR 495.22 billion via bond sale on Tuesday

--RBI to hold overnight variable rate repo auction for INR 500 billion 1000-1030 IST

LIQUIDITY

--Total net inflows of INR 176.61 billion. The calculation of flows does not take into account the redemption of the standing deposit facility and scheduled VRRs and variable rate reverse repo operations.

* Inflows

--INR 7.64 billion as coupon on 10.18%, 2026 gilt

--INR 10.87 billion as coupon on state bonds

--INR 158.10 billion on redemption of state bonds

* Outflow

--INR 294.89 billion as reversal of overnight VRR 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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