More Stories

Informist, Tuesday, Apr. 8, 2025

MUMBAI – Government bond prices and overnight indexed swap rates Wednesday are likely to open steady ahead of the Reserve Bank of India's Monetary Policy Committee's rate decision at 1000 IST. Gilts and swaps may also take cues from the overnight movement of US Treasury yields.

Most traders expect the rate-setting committee to cut the repo rate by 25 basis points to 6.00% and a change in the committee's stance to 'accommodative' from 'neutral', which have been priced in, dealers said. Traders may also take cues from any comments from RBI Governor Sanjay Malhotra on banking system liquidity. They will also take cues from any comments from Malhotra on US reciprocal tariffs on India.

Crude oil prices could also be a trigger for gilts and swaps after falling sharply the past week, dealers said. A sharp movement in the rupee against the dollar may also provide cues. 

On Wednesday, the two-day call rate will likely open near the repo rate as banks will borrow funds to meet their reserve requirements in early trade.

GOVERNMENT BONDS

On Wednesday, gilt prices may open steady ahead of the RBI Governor's address at 1000 IST, dealers said. Traders will also await the INR 190 billion Treasury bill auction, scheduled for 1230-1330 IST. 

RBI-administered markets will be shut on Thursday for Mahavir Jayanti, so traders may trim gilt positions towards the end of market hours on Wednesday, ahead of the INR 320-billion gilt auction on Friday. The government will sell INR 160 billion of the 6.92%, 2039 bond and INR 160 billion of a new 2065 bond on Friday.

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.39-6.55% on Wednesday. On Tuesday, the 10-year gilt ended at INR 102.21, or 6.47% yield.

OIS RATES

On Wednesday, swap rates may take cues from the movement in US Treasury yields at open, dealers said. However, swaps are expected to remain steady before the policy decision by the RBI's rate-setting panel, they said. The five-year swap rate may fall to near 5.70% if the RBI's rate-setting panel decides to soften the policy stance and may move to above 6.00% if they maintain the status quo on both rates and stance, dealers said. 

Any sharp rise in US yields due to an escalation in the tariff war between the US and China will push up Indian swaps rates, dealers said. However, the rise may be offset should the RBI's Monetary Policy Committee choose to cut the repo rate on Wednesday, they said. 

Short-term swaps will also closely track the movement in the overnight Mumbai Interbank Offered Rate. Some traders are expecting RBI to announce further liquidity measures. The one-year swap rate is seen at 5.80-6.05% and the five-year rate at 5.68-6.00%. On Tuesday, the one-year swap rate ended at 5.88% and the five-year swap rate closed at 5.77%.

CALL

On Wednesday, the two-day call rate will likely open near the repo rate as banks will borrow funds to meet their reserve requirements in early trade. During the day, the money market rates will take cues from the RBI's MPC meeting decision on policy rates. On Tuesday, the one-day call rate ended at 5.60%.

RBI AUCTION 

--RBI to hold 2-day VRR auction for INR 250 billion 1200-1230 IST 

--RBI to auction 91-day T-bills worth INR 90 billion

--RBI to auction 182-day T-bills worth INR 50 billion

--RBI to auction 364-day T-bills worth INR 50 billion

LIQUIDITY

--Total net inflows of INR 191.20 billion. The calculation of flows does not take into account redemption of the standing deposit facility and scheduled variable rate repo and reverse repo operations.

* Inflows

--INR 16.20 billion as coupon on state bonds

--INR 10.00 billion on redemption of state bonds

--INR 200.00 billion as payment from RBI gilt buy at OMO auction Tuesday

* Outflows

--INR 35.00 billion as payments on state bonds

--INR 235.15 billion on reversal of overnight VRR tender

End

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

Reported by Cassandra Carvalho

Edited by Saji George Titus

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.