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Informist, Friday, May 16, 2025

MUMBAI – The two-day call rate may open below the repo rate of 6.00% on Saturday due to comfortable liquidity in the banking system. As is usually the case on Saturdays, call money market volumes may remain low.

During the day, the call rate is seen in the range of 5.50-6.00% and the triparty repo rate in the range of 5.40-5.80%. On Friday, the three-day call ended at 5.45%.

Government bonds and overnight indexed swap rates are not traded on Saturday.

GOVERNMENT BONDS

On Monday, gilt prices may take cues from the movement of US Treasury yields over the weekend. Later, gilt prices may take cues from the result of the INR-280-billion switch and the INR 250-billion open market operation auctions. In the switch auction, the government will switch eight short-term gilts with eight longer-term bonds.
 
At the OMO auction, the RBI has offered to buy the 7.10%, 2029, the 7.95%, 2032, the 7.18%, 2033, the 7.73%, 2034, and the 7.54%, 2036 gilts. As seen in recent OMO auctions, traders will likely tender these bonds closer to the prevailing market levels, dealers said. 

In the secondary market, 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 also await the RBI's announcement on the surplus transfer to the central government, which they estimate to be around INR 3 trillion. 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 6.24-6.30% on Monday. On Friday, the 10-year gilt closed at INR 103.65, or 6.27% yield.

OIS RATES

Swaps are not traded on Saturday. On Monday, rates will likely track the movement in US Treasury yields, dealers said. The next significant cue on domestic interest rates would be the release of GDP data for Jan-Mar and FY25 on May 30, they said.

Traders also await the RBI's surplus transfer to the central government, which is likely to be announced on May 23. 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 or above the estimate, it could pull down swap rates, dealers said.

Traders will also track the movement of the overnight Mumbai Interbank Offered Rate for direction on short-term swap rates. The one-year swap rate is seen in a range of 5.50-5.75% Monday. The five-year contract is also seen in the 5.50-5.75% range. On Friday, the one-year swap closed at 5.62% and the five-year swap closed at 5.66%.

RBI AUCTION

--Nil

LIQUIDITY

--Total net inflows of INR 3.57 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 3.57 billion as coupon on state bonds

* Outflows

--Nil

End

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

Reported by Vidhushi RajPurohit

Edited by Saji George Titus

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