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Informist, Wednesday, Apr. 23, 2025

MUMBAI – Government bond prices are expected to open higher on Thursday, while overnight indexed swap rates may fall at the open, after the release of the minutes of the Reserve Bank of India's Monetary Policy Committee's meeting in April. Gilt prices and overnight indexed swap rates may also take cues from the movement in US Treasury yields, though the impact may be limited as focus remains on domestic cues, dealers said.

The minutes showed that the six MPC members were worried about domestic growth and the risks from the global uncertainty on trade and tariffs. On the other hand, several members expressed confidence on consumer inflation remaining anchored to the RBI's 4% target. RBI Executive Director Rajeev Ranjan said that the committee needs to continue to accord higher weight to growth amid the benign inflation outlook.

Meanwhile, the one-day call rate may open below repo rate due to lack of significant outflows, dealers said. During the day, the call rate is seen at 5.70-6.10% and the tri-party repo rate at 5.50-6.00%.

GOVERNMENT BONDS

On Thursday, traders will assess the MPC minutes and details of gilts for Tuesday's open market operation auction released post-market hours Wednesday, dealers said. The RBI has offered to buy the 7.04%, 2029; 6.10%, 2031; 7.26%, 2032; 6.19%, 2034; and 8.33%, 2036 gilts at the auction. This will be the last tranche of the four scheduled auctions for April. Some traders expected the RBI to include the 10-year benchmark, 6.79%, 2034 gilt at the auction, the absence of which might lead to some selling Thursday, dealers said.  

The fall in prices could be limited as investors will look to stock up on gilts as the RBI's rate-setting panel is expected to cut rates further. Any sharp movement in US Treasury yields could also lead to movement in gilt prices. However, even as uncertainty on trade and tariffs by US President Donald Trump persists, gilt prices are expected to follow domestic triggers more closely.

Some dealers see bond yields rising slightly, as traders take out profits and investors look to purchase gilts at higher yields, dealers said. The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.28-6.36% on Thursday. On Wednesday, the 10-year gilt ended at INR 103.24, or 6.33% yield.

OIS RATES

On Thursday, swap rates may fall after the minutes of the MPC's April meeting were seen to affirm traders' views that further repo rate cuts were coming in the June and August monetary policy reviews. The fall may be limited as further rate cuts are already priced in, dealers said.

The overnight movement in US Treasury yields may also lend direction to swap rates. The impact of the offshore trigger may be muted as traders have a high conviction that domestic interest rates are going to fall further, particularly after the minutes, dealers said.

With no major data releases scheduled, traders will closely track the movement of the overnight Mumbai Interbank Offered Rate for direction on short-term swap rates. Swap rates maturing in three years and above may be sensitive to developments on the impact of the ongoing US-China trade war.

On Wednesday, the one-year swap closed at 5.72% and the five-year swap closed at 5.66%.

CALL

On Thursday, the one-day call rate may open below repo rate due to a lack of significant outflows, dealers said. During the day, the call rate is seen at 5.70-6.10% and the tri-party repo rate at 5.50-6.00%. On Wednesday, one-day call ended at 5.95%.

RBI AUCTION

--RBI to hold overnight variable rate repo auction for INR 1.00 trillion 1000-1030 IST

LIQUIDITY

--Total net outflows of INR 129.91 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 194.00 billion as redemption of 91-day Treasury bills

--INR 85.00 billion as redemption of 182-day Treasury bills

--INR 81.59 billion as redemption of 364-day Treasury bills

--INR 5.55 billion as coupon on state bonds 

* Outflows

--INR 352.00 billion as payment for 91-day Treasury bills

--INR 88.00 billion as payment for 182-day Treasury bills

--INR 56.05 billion as payment for 364-day Treasury bills

--INR 188.72 billion on reversal of overnight VRR tender

End

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

Reported by Aaryan Khanna

Edited by Deepshikha Bhardwaj

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