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Informist, Wednesday, Mar. 12, 2025

MUMBAI – Government bond prices and overnight indexed swap rates are likely to take cues from the overnight movement in US Treasury yields at opening on Thursday after US CPI inflation data for February was released post market hours Wednesday, dealers said. 

US CPI inflation was lower than expected, at 2.8% on year, against 2.9% estimated by a Dow Jones poll. Core CPI rose 0.2% on month, against 0.3% expected. The data may lend cues to the US Federal Open Market Committee's decision on rates. The FOMC is scheduled to meet next week and is widely seen keeping policy rates unchanged.

Traders may also assess developments related to US tariff policy and the rupee's movement against the dollar, dealers said. Crude oil prices could also be a trigger if they move significantly.

On Thursday, the four-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%.

GOVERNMENT BONDS

On Thursday, gilt prices are likely to take cues from the movement on US Treasury yields at opening after US CPI inflation data for February which released post market hours Wednesday.

Prices might also remain up after India's CPI inflation eased to 3.61% in February, below the Reserve Bank of India's 4% medium-term target. It was also below the expectation of 3.9% in an Informist poll. Bond prices may rise sharply as rate cut bets for April intensify, with further bets on rate cuts in June or August also in traders' minds.

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.65-6.72% during the day. On Wednesday, the bond settled at INR 100.75, or 6.68% yield. 

OIS RATES

Swap rates may take cues from the movement in US Treasury yields at open on Thursday, after the release of US CPI data. US weekly jobless claims due Thursday post market is also awaited, dealers said.

Short-term swaps will closely track the movement in overnight Mumbai Inter-Bank Offered Rate -- the floating leg of the OIS contract. The one-year swap rate is seen at 6.10-6.20% and the five-year rate is seen at 5.90-6.03%. On Wednesday, the one-year swap rate ended at 6.12% and the five-year swap rate closed at 5.96%.

CALL

On Thursday, the four-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 Wednesday, the one-day call rate ended at 6.25%.

RBI AUCTION

--RBI to hold 4-day variable rate repo auction for INR 500 billion 1000-1030 IST 

--RBI to hold 8-day VRR auction for INR 1.00 trillion 1100-1130 IST

LIQUIDITY

--Total net outflows of INR 31.47 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 165.50 billion on redemption of 91-day Treasury bills

--INR 77.00 billion on redemption of 182-day Treasury bills

--INR 99.79 billion on redemption of 364-day Treasury bills

--INR 8.46 billion as coupon on state bonds

* Outflows
--INR 157.00 billion on payment of 91-day T-bills

--INR 141.50 billion on payment of 182-day T-bills

--INR 83.73 billion on payment of 364-day T-bills

--INR 181.86 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 Deepshikha Bhardwaj

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