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Informist, Friday, Mar. 28, 2025

MUMBAI - The four-day call money rate may open near the policy repo rate on Saturday due to banks' demand for funds at the financial year-end on Monday. Money markets are shut on Monday for Id-ul-Fitr and on Tuesday for banks' annual closing of accounts.

Trade volumes may be higher than usual Saturdays, but remain down from a weekday, dealers said. Most banks have met their year-end fund requirements on Friday. 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 Friday, the five-day call rate ended at 7.00%.

Government bonds and overnight indexed swap rates are not traded on Saturday. On Wednesday, they may take cues from the movement in US Treasury yields over the long weekend, and traders also remain cautious on news regarding the Donald Trump administration's reciprocal tariffs that are scheduled to come into effect Wednesday.

GOVERNMENT BONDS

On Wednesday, government bond prices may take cues from the movement in US Treasury yields after the release of US inflation data post market hours Friday. Traders may also assess developments related to US tariff policy, with the Donald Trump administration's reciprocal tariffs set to kick in on Wednesday.

The US personal consumption expenditure price index rose 0.3% on month in February, the same as January and in line with consensus expectations. However, the core personal consumption expenditures rose 0.4% on month and 2.8% on year in February, slightly higher than expected, and up from January.

Traders are likely to retain their bets on a repo rate cut and stance change by the RBI's MPC in April due to a lack of significant interest rate cues until the next review on Apr. 7-9, dealers said. Dealers are also looking forward to states' borrowing plan for Apr-Jun.

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.55-6.63% during the day. On Friday, the 10-year gilt ended at INR 101.45, or 6.58%. 

OIS RATES

On Wednesday, swap rates may take cues from the overnight movement in US Treasury yields and the movement in government bond yields during the day, dealers said. Short-term swaps will closely track the movement in the overnight Mumbai Interbank Offer Rate, with the RBI's proactive liquidity measures seen keeping the rate near the policy repo rate of 6.25%, dealers said. The overnight MIBOR on Thursday fell below the repo rate for the first time in over five months, and is expected to remain at or below the repo rate in April as liquidity conditions ease.

Any news on the US government's proposed tariffs and their potential impact on global trade may also impact 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. The tariffs are set to go live on Wednesday.

Data released after market hours showed the US personal consumption expenditure price index rose 0.3% on month in February, the same as January and in line with consensus expectations. However, the core personal consumption expenditures rose 0.4% on month and 2.8% on year in February, slightly higher than expected, and up from January.

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 provide cues to swaps.

The one-year swap rate is seen at 6.00-6.12% and the five-year rate at 5.85-6.00%. On Friday, the one-year swap rate ended at 6.04% and the five-year swap rate closed at 5.91%.

RBI AUCTION 

--Nil

LIQUIDITY

--Total net inflows of INR 24.06 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 24.06 billion as coupon on state bonds on Saturday

* Outflows

--Nil

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Aaryan Khanna

Edited by Vandana Hingorani

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