More Stories

Informist, Wednesday, May 14, 2025

MUMBAI – Government bonds will likely be steady at the open on Thursday ahead of the Reserve Bank of India's open market operation auction to buy gilts worth INR 250 billion, dealers said. Gilt prices and overnight indexed swaps will also take cues from the overnight movement in US Treasury yields.

The overnight movement in crude prices may also lend direction to both the markets, dealers said. Any sharp movement in the Indian rupee against the dollar will also likely provide some cues to traders. Traders also await news on the RBI's transfer of surplus to the central government, likely this month. Traders estimate the transfer to be INR 2.5 trillion to INR 3.5 trillion, which will boost the durable liquidity in the banking system.

Traders will also likely continue to position for another 25 basis point repo rate cut in June. Hopes of a repo rate cut strengthened after the headline CPI inflation for April fell to a 69-month low of 3.16% Tuesday.

On Thursday, the one-day call rate may open below the RBI's repo rate due to comfortable liquidity. During the day, the call rate is seen at 5.50-5.95% and the tri-party repo rate at 5.50-5.85%.

GOVERNMENT BONDS

On Thursday, government bond prices are seen opening steady ahead of the RBI's OMO auction. Later in the day, gilt prices may take cues from the results of the auction, dealers said. 

The RBI has offered to buy the 7.10%, 2029, the 7.26%, 2032, the 7.50%, 2034, the 6.67%, 2035, and the 7.41%, 2036 gilts at the auction. Traders expect the 7.26%, 2032 and the 6.67%, 2035 gilts to be tendered the most by banks and the cut-off prices for these bonds are expected to be closer to secondary market levels. Banks are also likely to tender the other bonds at prevailing market prices or at marginal discounts, dealers said. 

Demand for bonds maturing between five and 15 years is seen as robust as banks look to replenish stocks of bonds of similar maturities sold to the RBI in its open market operations auctions. Traders will also look at US Treasury yields and crude oil prices for direction, dealers said.

Traders also await the news on the RBI's transfer of surplus to the central government, due this month. Traders estimate the transfer to be INR 2.5 trillion to INR 3.5 trillion, which will boost the durable liquidity in the banking system. India's GDP growth estimates for Jan-Mar and for 2024-25 (Apr-Mar), due at the end of May, could be the next big trigger for gilts. The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.28-6.34% on Thursday. On Wednesday, the 10-year benchmark gilt ended at INR 103.53 or 6.29% yield.

OIS RATES

On Thursday, swap rates will likely track the overnight movement in US Treasury yields, dealers said. Traders also await the news on the RBI's transfer of surplus to the central government, due this month. Traders estimate the dividend to be around INR 3 trillion, which will add durable liquidity to the banking system. If the transfer is in line with the estimates or above, it could pull swap rates down, dealers said.

Traders will also track the movement of the overnight Mumbai Interbank Offer Rate for direction on short-term swap rates. The one-year swap rate is seen in a range of 5.50-5.75% Thursday. The five-year contract is also seen in the 5.50-5.75% range. On Wednesday, the one-year swap rate ended at 5.63% and the five-year swap rate closed at 5.66%.

CALL

On Thursday, the one-day call rate may open below the RBI's repo rate due to comfortable liquidity. During the day, the call rate is seen at 5.50-5.95% and the tri-party repo rate at 5.50-5.85%. On Wednesday, the one-day call ended at 5.85%.

RBI AUCTION 

--RBI to buy five gilts worth INR 250 billion via OMO auction 0930-1030 IST

--RBI to hold overnight variable rate repo auction for INR 250 billion 1000-1030 IST

LIQUIDITY

--Total net inflows of INR 176.56 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 133.88 billion as redemption of 91-day T-bills

--INR 75.00 billion as redemption of 182-day T-bills

--INR 80.48 billion as redemption of 364-day T-bills

--INR 6.59 billion as coupon on state bonds

--INR 40.00 billion as redemption of state bonds

--INR 17.15 billion as coupon on 5.74%, 2026 gilt

--INR 40.57 billion as coupon on 6.79%, 2027 gilt

* Outflows

--INR 100.00 billion as payment of 91-day T-bills

--INR 60.00 billion as payment of 182-day T-bills

--INR 57.11 billion as payment of 364-day T-bills

--INR 53.41 billion on reversal of overnight VRR tender

End

Reported by Vidhushi RajPurohit

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.