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Informist, Tuesday, Jun. 10, 2025

MUMBAI – Government bond prices and overnight indexed swap rates on Wednesday are likely to take cues from the movement in US Treasury yields after the release of key economic data in the country, dealers said. 

Traders see the US CPI inflation data, scheduled for release post market hours Wednesday, as the next trigger for US yields. With domestic rate cuts seen nearly done after the Reserve Bank of India's rate-setting panel delivered a 50-basis-point cut in the repo rate Friday, traders are now more keenly tracking US yields and data, dealers said. Traders also await the US Federal Open Market Committee's policy statement next week for an outlook on rates, they said.

On Wednesday, the one-day call rate is likely to open near the RBI's repo rate of 5.50%. During the day, the call rate is seen in a range of 5.00-5.60% and the triparty repo rate in a range of 4.95-5.45%.

GOVERNMENT BONDS

On Wednesday, bond prices are likely to take cues from the movement of US yields after key US economic data, dealers said. Traders await US CPI for May, due post market hours Wednesday, and will pay more attention to offshore cues due to a lack of significant domestic triggers until India CPI data release for May Thursday. Traders may also take cues from the result of the INR 190-billion Treasury bill auction, especially after short-term gilts fell sharply Tuesday.

The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.20-6.35% and that on the most-traded 6.79%, 2034 bond is seen at 6.32-6.40% Wednesday. On Tuesday, the 6.33%, 2035 bond ended at INR 100.25, or 6.29% yield. The 6.79%, 2034 gilt ended at INR 102.95, or 6.36% yield.

OIS RATES

On Wednesday, swap rates may track the movement of US yields overnight, dealers said. Volatility in the domestic OIS market is likely to persist as traders readjust their positions after the RBI's surprise 50-bps repo rate cut on Friday, which was larger than expected. A further rise in US yields may see the five-year OIS rate trying to rise above the key 5.73% level, dealers said. Longer-tenure swap rates may also track the movement of government bond yields, dealers said.

Traders will also track the movement of the overnight Mumbai Interbank Offer Rate for direction on short-term swap rates. Swaps maturing up to one year are likely to draw flows from offshore traders as the rates do not reflect any rate cut in the next 12 months, which remains a minority expectation, dealers said. The one-year swap rate is seen in a range of 5.40-5.55% Wednesday. The five-year contract is seen at 5.65-5.85%. On Tuesday, the one-year swap closed at 5.54% and the five-year swap closed at 5.73%.

CALL

On Wednesday, the one-day call rate is likely to open near the RBI's repo rate of 5.50%. During the day, the call rate is seen in a range of 5.00-5.60% and the triparty repo rate in the range of 4.95-5.45%. On Tuesday, the one-day call rate closed at 5.25%.

RBI AUCTION

--RBI to auction 91-day T-bills worth INR 90 billion

--RBI to auction 182-day T-bills worth INR 50 billion

--RBI to auction 364-day T-bills worth INR 50 billion

LIQUIDITY

--Total net outflows of INR 173.97 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 1.81 billion as coupon on 7.24%, 2033 green bond

--INR 7.52 billion as coupon on state bonds

* Outflows

--INR 183.30 billion as payment for state bonds

--INR 38.53 billion as reversal of overnight variable rate repo auction

End

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

Reported by Cassandra Carvalho

Edited by Tanima Banerjee

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