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Informist, Friday, Jun. 6, 2025

MUMBAI – Monday, government bond prices and overnight indexed swap rates are likely to take cues from the movement of US Treasury yields after the US employment report for May, dealers said. Data released after Indian market hours Friday showed US non-farm payrolls rose 139,000 in May, against a Dow Jones consensus estimate of 125,000. Gilts and swaps are not traded Saturdays.

Over the weekend, traders will digest the outcome of the Reserve Bank of India's Monetary Policy Committee meeting. The rate-setting panel cut the repo rate by 50 basis points and changed its stance back to 'neutral' from 'accomodative'.

The interbank call market is shut Saturday for Bakri Id. Monday, the one-day call rate is likely to open below the RBI's repo rate of 5.50% on comfortable liquidity. During the day, the call rate is seen in a range of 4.90-5.50% and the triparty repo rate in a range of 4.80-5.30%.

GOVERNMENT BONDS

Monday, bond prices are likely to take cues from the movement of US yields over the weekend after the US employment report for May, dealers said. Next week, traders expect bond prices to recover from the sharp fall Friday. Bond prices may trade higher Monday after the RBI, after market hours, announced a buyback of INR 260.00 billion worth of five gilts. Most traders expect a series of buyback auctions after the central bank transferred a record high surplus to the Centre for FY25.

The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.18-6.25%. The yield on the most-traded 6.79%, 2034 bond is seen at 6.25-6.32% Monday. Friday, the 6.33%, 2035 bond ended at INR 100.67, or 6.24% yield. The 6.79%, 2034 gilt ended at INR 103.48, or 6.29% yield.

OIS RATES

Monday, swaps will take cues from the movement of US yields after the release of jobs data Friday, dealers said. Swaps may resist falling sharply further as market hopes of further rate cuts in 2025 were dashed by the rate-setting panel changing its stance to 'neutral' from 'accommodative', they said.

Traders will also track the movement of the overnight Mumbai Interbank Offered Rate for direction on short-term swap rates. Shorter-tenure swaps maturing in up to one year could fall further on expectations of a further boost in liquidity with the cut in cash reserve ratio. However, longer-tenure swaps may track the movement of government bonds, dealers said. 

The one-year swap rate is seen in a range of 5.40-5.55% Monday. The five-year contract is seen at 5.51-5.75%. Friday, the one-year swap closed at 5.48% and the five-year swap closed at 5.68%.

CALL

The interbank call market is shut Saturday for Bakri Id. Monday, the one-day call rate is likely to open below the RBI's repo rate of 5.50% on comfortable liquidity. During the day, the call rate is seen in a range of 4.90-5.50% and the triparty repo rate in a range of 4.80-5.30%. Friday, the three-day call rate closed at 5.00%.

RBI AUCTION

--RBI to hold overnight VRR auction for INR 250 bln 1000-1030 IST Mon 

LIQUIDITY

--Total net outflows of INR 213.13 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 7.50 billion as coupon on state bonds on Saturday

--INR 32.11 billion as coupon on 2031 floating rate bond on Saturday

--INR 37.12 billion as coupon on 8.33%, 2036 gilt on Saturday

--INR 13.22 billion as coupon on state bonds on Sunday

--INR 6.97 billion as coupon on 6.64%, 2027 gilt on Monday

--INR 9.94 billion as coupon on state bonds on Monday

* Outflows

--INR 320.00 billion as payment for gilts on Monday

--INR 35.50 billion as reversal of 3-day variable rate repo auction on Monday

End

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

Reported by Cassandra Carvalho

Edited by Rajeev Pai

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