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Informist, Wednesday, Apr. 2, 2025

MUMBAI – Government bond prices and overnight indexed swap rates will take cues from overnight movement in US Treasury yields on Thursday after President Donald Trump announces reciprocal tariffs he has been warning of for several weeks, dealers said. 

The impact of the movement in US yields on domestic government bonds and swaps will depend on the precise nature of tariffs imposed on India, they said. Traders may also assess further developments related to US tariff policy, dealers said.

Crude oil prices could also be a trigger for swaps if they move significantly, dealers said. Any sharp movement in the rupee's dollar exchange rate may also provide cues.

On Thursday, the one-day call rate may open near the repo rate of 6.25% due to the demand for funds from banks in early trade.

GOVERNMENT BONDS

On Thursday, government bond prices may take cues from the movement in US Treasury yields, dealers said. Traders are likely to retain their bets on a repo rate cut and a stance change by the Reserve Bank of India's Monetary Policy Committee next week, dealers said. 

The result of the Reserve Bank of India's open market operation auction to buy gilts worth INR 200 billion may also provide cues to gilts in the latter part of the day, dealers said. The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.45-6.56% during the day. On Wednesday, the 10-year gilt ended at INR 102.17, or 6.48%. 

OIS RATES

On Thursday, swap rates may take cues from overnight movement in US Treasury yields, dealers said. The movement in Indian government bond yields on Thursday will also lend cues to swap rates.

Short-term swaps will closely track the movement in the overnight MIBOR, with the RBI's liquidity measures seen bringing the rate near the policy repo rate of 6.25%, dealers said. Any further improvement in liquidity conditions will also be closely tracked by traders.

The one-year swap rate is seen at 5.97-6.06% and the five-year rate at 5.80-5.88%. On Wednesday, the one-year swap rate ended at 5.99% and the five-year swap rate closed at 5.83%.

CALL

On Thursday, the one-day call rate may open near the repo rate of 6.25% due to the demand for funds from banks in early trade. 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 5.80%

RBI AUCTION 

--RBI will conduct an overnight variable rate repo auction for INR 250 billion at 1000-1030 IST

--Six states to raise INR 118 billion via bond sale at 1030-1130 IST

--RBI to buy six gilts worth INR 200 billion via OMO auction 0930-1030 IST

LIQUIDITY

--Total net inflows of INR 21.43 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 120.00 billion on redemption of 91-day Treasury bills

--INR 82.13 billion on redemption of 364-day T-bills

--INR 16.68 billion as coupon payment on state bonds

* Outflows

--INR 96.04 billion on payment of 91-day T-bills

--INR 50.00 billion on payment of 182-day T-bills

--INR 51.35 billion on payment of 364-day T-bills

--INR 91.70 billion on 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 Saji George Titus

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