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Informist, Wednesday, Mar. 26, 2025

MUMBAI – Government bond prices are seen steady before the release of the borrowing calendar for the first half of the financial year begining April. Should the calendar be released late Wednesday, gilt prices are seen taking cues on Thursday, dealers said. 

Overnight indexed swap rates are likely to take cues from the overnight movement in US Treasury yields, dealers said. Any news on the US government's proposed tariffs and their potential impact on global trade may also impact both gilt and swap rates. US President Donald Trump Wednesday said there would be "not too many" exceptions to his imposition of reciprocal tariffs on imports from US trade partners.

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 one-day call rate may open above the repo rate as banks will borrow funds to meet their reserve requirements in early trading hours.

GOVERNMENT BONDS

Traders await the Apr-Sept borrowing calendar for cues on gilt prices. Should the calendar come after market hours, gilt prices may take cues from that, dealers said. Traders do not expect aggressive selling ahead of the calendar release due to expectations of a light supply in the first half of the year.

Some dealers are also looking forward to states' borrowing plan for Apr-Jun, also likely to be released this week. Traders will retain their bets on a repo rate cut and stance change by the Reserve Bank of India's Monetary Policy Committee in April due to a lack of significant interest rate cues until the next review on Apr. 7-9, dealers said.

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.55-6.65% during the day. On Wednesday, the 10-year gilt ended at INR 101.31 or 6.60%. 

OIS RATES

On Thursday, swap rates may take cues from the overnight movement in US Treasury yields. Swaps may also react to the movement in government bond yields 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 below the Marginal Standing Facility rate of 6.50% for the rest of the seasonal tightness in March, dealers said.

The one-year swap rate is seen at 6.00-6.13% and the five-year rate at 5.85-6.00%. On Wednesday, the one-year swap rate ended at 6.10% and the five-year swap rate closed at 5.93%.

CALL

On Thursday, the one-day call rate may open above the repo rate as banks will borrow funds to meet their reserve requirements in early trading hours. During the day, the call rate is seen in the range of 5.80-6.40% and the triparty repo rate in the range of 5.75-6.30%. On Wednesday, the one-day call rate ended at 5.85%.

RBI AUCTION 

--RBI to hold overnight variable rate repo auction for INR 750 billion at 1000-1030 IST

LIQUIDITY

--Total net outflows of INR 238.78 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 90.07 billion on redemption on 91-day Treasury bills

--INR 12.16 billion as coupon on state bonds

* Outflows

--INR 146.87 billion as payment for 91-day T-bills

--INR 121.50 billion as payment for 182-day T-bills

--INR 72.65 billion as payment for 364-day T-bills

--INR 354.86 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 Tanima Banerjee

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