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Informist, Tuesday, Mar. 18, 2025

MUMBAI – Government bond prices are seen opening higher Wednesday after the Reserve Bank of India, post market hours Tuesday, announced an open market operation to buy gilts for a notified amount of INR 500 billion through an auction, dealers said. Traders had anticipated the announcement, which led to prices rising on Tuesday.

Bond prices and overnight indexed swap rates may also take cues from the movement of US Treasury yields ahead of the outcome of the US Federal Open Market Committee meeting that will be announced at 2330 IST Wednesday. The panel is expected to hold rates steady this month. However, traders will closely watch for the commentary of the committee, particularly from US Federal Reserve Chair Jerome Powell.

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. Easing liquidity conditions could increasingly prompt traders to bet on a rate cut by the RBI's Monetary Policy Committee at its meeting in April, and later in June or August.

On Wednesday, the one-day call rate may open above the repo rate as banks will borrow funds to meet their reserve requirements. During the day, the call rate is seen in the range of 5.80-6.50% and the triparty repo rate is seen in the range of 5.75-6.40%.

GOVERNMENT BONDS

On Wednesday, gilt prices are likely to open higher after the RBI offered to buy the 7.04%, 2029; 7.17%, 2030; 7.26%, 2032; 7.26%, 2033; 7.50%, 2034 and 7.18%, 2037 bonds at an auction on Mar. 25. Including auction held Tuesday, the RBI has bought gilts worth INR 2.00 trillion through open market auctions, and INR 388.15 billion worth of gilts through screen-based purchases in January.

Bond prices may also take cues from the movement on US Treasury yields ahead of the US FOMC meeting outcome. The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.64-6.72% during the day. On Tuesday, the bond settled at INR 100.82, or 6.67% yield.

OIS RATES

On Wednesday, swap rates may take cues from the overnight movement of US Treasury yields, dealers said. While swap rates have not been closely tracking the movement of US Treasury yields, traders are looking forward to the US FOMC's rate decision. Short-term swaps will closely track the movement of the overnight Mumbai Interbank Offer Rate, dealers said.

The one-year swap rate is seen at 6.08-6.20% and the five-year rate at 5.90-6.03%. On Tuesday, the one-year swap rate ended at 6.11% and the five-year swap rate closed at 5.96%.

CALL

On Wednesday, the one-day call rate may open above the repo rate as banks borrow funds to meet their reserve requirements. During the day, the call rate is seen in the range of 5.80-6.50% and the triparty repo rate is seen in the range of 5.75-6.40%. On Tuesday, the one-day call rate ended at 6.40%.

RBI AUCTION

--RBI to auction 91-day T-bills worth INR 140 billion

--RBI to auction 182-day T-bills worth INR 120 billion

--RBI to auction 364-day T-bills worth INR 70 billion

--RBI to hold overnight variable rate repo auction for INR 1.00 trillion

LIQUIDITY

--Total net inflows of INR 104.64 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 22.20 billion as coupon on state bonds

--INR 50.71 billion as coupon on 7.88%, 2030 gilt

--INR 57.92 billion as coupon on 7.40%, 2062 gilt

--INR 500.00 billion as payment from RBI gilt buy at OMO auction Tuesday

* Outflows

--INR 526.20 billion as payment for state bonds

--INR 526.93 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 Cassandra Carvalho

Edited by Ashish Shirke

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