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Informist, Thursday, Mar. 20, 2025

MUMBAI – On Friday, overnight indexed swap rates may take cues from the movement of US Treasury yields after the US jobless claims report for the week ended Saturday is detailed, dealers said. Government bond prices may also track the movement of US yields, but are likely to sustain Thursday's momentum on bets of a rate cut by the Reserve Bank of India's Monetary Policy Committee in April.

US weekly jobless claims rose less than expected to 223,000, against The Wall Street Journal's median estimate of 225,000. Traders may also assess developments related to the US tariff policy and the rupee's movement against the dollar, dealers said. Crude oil prices could be a trigger if they move significantly.

On Friday, the three-day call rate may open above the repo rate and stay elevated as banks will borrow to cover reserve requirements and outflows for Goods and Services Tax payments. During the day, the call rate is seen in the range of 5.80-6.50% and the triparty repo rate in the range of 5.75-6.40%.

GOVERNMENT BONDS

On Friday, gilt prices may sustain Thursday's momentum as traders bet on the possibility of further domestic rate cuts and a change in stance by the Monetary Policy Committee to 'accommodative' in April. Traders will also wait for any announcement by the RBI on liquidity, and may also take cues from overnight lending rates. Bond prices may take cues from the overnight movement in US yields after weekly jobless claims.

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.62-6.68% during the day. On Thursday, the bond settled at INR 101.07, or 6.64% yield.

OIS RATES

On Friday, swap rates may take cues from the overnight movement of US Treasury yields. Swaps may also react to the movement of bonds during the day, dealers said.

Short-term swaps will closely track the movement in the overnight Mumbai Interbank Offered Rate, with the RBI's proactive liquidity measures seen keeping the rate in check for the rest of March, dealers said. The one-year swap rate is seen at 6.00-6.10% and the five-year rate at 5.80-6.95%. On Thursday, the one-year swap rate ended at 6.10% and the five-year swap rate closed at 5.87%.

CALL

On Friday, the three-day call rate may open above the repo rate and stay elevated as banks will borrow to cover reserve requirements and outflows for GST payments. During the day, the call rate is seen in the range of 5.80-6.50% and the triparty repo rate in the range of 5.75-6.40%.

After market hours on Thursday, the RBI said that it had decided to not conduct the usual 14-day variable rate repo auction on Friday "on a review of current and evolving liquidity conditions". On Thursday, the one-day call rate ended at 5.85%.

RBI AUCTION

--RBI to hold 5-day VRR auction for INR 500 billion 1100-1130 IST under LAF 

--RBI to hold 3-day VRR auction for INR 1.5 trillion from 1000-1030 IST 

LIQUIDITY

--Total net inflows of INR 67.89 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 32.20 billion as coupon on state bonds

--INR 35.06 billion as coupon on 8.28%, 2027 gilt

--INR 634.11 million as coupon on 8.33%, 2032 gilt

* Outflows

--INR 83.75 billion as reversal of 14-day variable rate repo tender

--INR 98.60 billion as reversal of 8-day variable rate repo tender

--INR 237.65 billion as reversal of 4-day variable rate repo tender

--INR 1.24 trillion 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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