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Informist, Friday, Apr. 25, 2025

MUMBAI – Government bond prices and overnight indexed swap rates could take cues from US Treasury yields Monday if they move sharply, dealers said. Traders will also closely watch any further developments over the weekend on India-Pakistan tensions.

On Monday, the one-day call rate may open below the repo rate due to sufficient liquidity, dealers said. During the day, the call rate is seen at 5.80-5.90% and the tri-party repo rate at 5.50-6.00%.

GOVERNMENT BONDS

Gilts are not traded on Saturday. On Monday, gilt prices could take cues from US yields if they move sharply. Traders will also closely watch any further developments on India-Pakistan tensions over the weekend, dealers said. Without any major triggers, the 10-year gilt yield may move in a range of 6.32-6.38%, they said.

Some dealers see bond yields rising slightly, as traders book profits and investors look to purchase gilts at higher yields, dealers said. However, the fall in prices could be limited as investors will look to buy gilts as the hope of further rate cuts by the RBI's rate-setting panel persists. India's GDP growth estimates for Jan-Mar and 2024-25 (Apr-Mar) at the end of May, which could provide more clarity on rate cuts during the year, will be the next major triggers for gilts. The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.28-6.40% on Monday. On Friday, the 10-year benchmark gilt ended at INR 102.98, or at 6.36% yield.

OIS RATES

Swaps are not traded on Saturday. On Monday, swap rates are likely to take cues from geopolitical developments between India and Pakistan over the weekend, dealers said. Traders will unwind their received fixed-rate bets if there are further instances of firing on the border or major military activity between the two countries, dealers said. However, if a diplomatic solution is found, traders may receive the two- and five-year swap rates aggressively, pulling them down by up to 5 bps each.

The movement in US Treasury yields may also lend direction to swap rates. The impact of the offshore trigger may be muted as traders are convinced domestic interest rates are going to fall further, particularly after the release this week of the minutes of the Monetary Policy Committee's April meeting, dealers said.

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

The one-year swap rate is seen in a range of 5.55-5.75%. The five-year contract is seen within 5.63-5.82%. On Friday, the one-year swap closed at 5.73% and the five-year swap closed at 5.68%.

CALL

Monday, the one-day call rate may open below the repo rate due to sufficient liquidity, dealers said. During the day, the call rate is seen at 5.80-5.90% and the tri-party repo rate at 5.50-6.00%. On Friday, three-day call ended at 5.90%.

RBI AUCTION

--RBI to hold overnight variable rate repo auction for INR 500 billion from 1000-1030 IST on Monday

LIQUIDITY

--Total net outflows of INR 204.46 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 8.02 billion as coupon on state bonds on Saturday

--INR 38.97 billion as coupon on 7.72%, 2055 gilt on Saturday

--INR 9.30 billion as coupon on state bonds on Sunday

--INR 9.25 billion as coupon on state bonds on Monday

* Outflows

--INR 270.00 billion as payment for gilts on Monday

--INR 69.47 billion on reversal of three-day VRR tender on Monday

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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