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Informist, Wednesday, Apr. 30, 2025

MUMBAI – Government bond prices are seen opening steady on Friday if there are no surprises on the geopolitical front. Gilts are seen steady before INR-360-billion weekly gilt auction at 1030-1130 IST and will watch out for the auction results for cues later in the day. Money markets will be shut on Thursday on account of Maharashtra Day.

Overnight indexed swaps will eye any geopolitical developments between India and Pakistan, dealers said. The movement in US Treasury yields may also lend direction to swap rates and gilt prices.

On Friday, the three-day call rate may open near the RBI's repo rate on demand for funds in early trade, dealers said. During the day, the call rate is seen at 5.50-6.00% and the tri-party repo rate at 5.50-6.10%.

GOVERNMENT BONDS

On Friday, gilt prices are seen taking cues from any further developments between India and Pakistan, dealers said. Without any further development, gilt prices are seen steady before the weekly gilt auction. 

Traders have already placed short bets on the 10-year benchmark gilt to make room for the INR 300 billion of new 10-year 2035 gilt to be issued at the auction on Friday, and will watch out for the auction results for cues later in the day. Gilts could take cues from US yields if they move sharply. 

India's provisional GDP growth estimates for Jan-Mar and 2024-25 (Apr-Mar), due at the end of May, could provide more clarity on rate cuts during the year, which would be the next major triggers for gilts. Despite geopolitical uncertainty, gilt yields are expected to remain below 6.40% as investors will look to buy gilts due to hope of further rate cuts by the Reserve Bank of India's Monetary Policy Committee. The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.28-6.40% on Friday. On Wednesday, the 10-year gilt closed at INR 103.04 or 6.36% yield.

OIS RATES

On Friday, swap rates are likely to take cues from geopolitical developments between India and Pakistan, dealers said. Traders will unwind their received fixed-rate bets if there is major military activity between the two countries, dealers said.

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 last week of the minutes of the Monetary Policy Committee's April meeting, dealers said.

Traders will track the movement of the overnight Mumbai Interbank Offer Rate for direction on short-term swap rates, with the expectation it would fall to 5.75% from 5.93% on Tuesday. Swaps maturing in three years and above may be sensitive to developments in the US-China trade war and the broader US tariff policy.

The one-year swap rate is seen in a range of 5.55-5.75% on Friday. The five-year contract is seen in the 5.55-5.70% range. On Wednesday, the one-year swap closed at 5.65% and the five-year swap closed at 5.62%.

CALL

On Friday, the three-day call rate may open near the RBI's repo rate on demand in early trade, dealers said. During the day, the call rate is seen at 5.50-6.00% and the tri-party repo rate at 5.50-6.10%. On Wednesday, two-day call ended at 6.00%.

RBI AUCTION

--RBI will hold a three-day variable rate repo auction for INR 250 billion at 1000-1030 IST on Friday

--Govt to auction Two gilts worth INR 360 billion on Friday at 1030-1130 IST

--RBI to hold 14-day VRR auction for INR 250 billion 1100-1130 IST Friday

LIQUIDITY

--Total net outflows of INR 143.52 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 148.38 billion on redemption of 91-day Treasury bills on Thursday

--INR 62.44 billion on redemption of 182-day T-bills on Thursday

--INR 7.05 billion as coupon on state bonds on Thursday

--INR 112.11 billion on redemption of 364-day T-bills on Friday

--INR 6.16 billion as coupon on state bonds on Friday

* Outflows

--INR 361.00 billion as payment on 91-day T-bills on Friday

--INR 67.00 billion as payment on 182-day T-bills on Friday

--INR 51.65 billion as payment on 364-day T-bills on Friday

--INR 149.52 billion on reversal of two-day VRR tender on Friday

End

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

Reported by Srijita Bose

Edited by Deepshikha Bhardwaj

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