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Informist, Monday, Jun. 16, 2025

MUMBAI – Government bond prices and overnight indexed swap rates will take cues from developments in Israel-Iran conflict, dealers said. Gilts and swaps may also take cues from the overnight movement in US Treasury yields, they said.

Gilts may also take cues from the results of state bond auction scheduled later in the day, dealers said. Longer-tenure bonds are expected to be in favour in the secondary market due to the lower-than-indicated supply of state bond at the auction Tuesday, they said.

Traders will also look forward to the outcome of the US Federal Open Market Committee meeting late Wednesday. They expect a status quo on rates, but will keenly track the comments of Fed officials.

On Tuesday, the one-day call rate is likely to open near the Reserve Bank of India'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 Tuesday, bond prices are likely to take cues from developments in West Asia. Though bond traders remain wary of any escalation in the Israel-Iran conflict, a surge in crude oil prices has somewhat been priced in, dealers said. However, if the rupee falls sharply against the dollar due to rise in crude oil prices, it may indirectly hit bond prices, they said.

Gilts may also take cues from the overnight movement of US yields, dealers said.

Longer tenure bonds may be preferred Tuesday on account of the lower-than-indicated state bond auction. Market sentiment continues to be subdued due to geopolitical tensions as well as uncertainty around domestic rates, and bond prices are likely to be volatile for the next few trading sessions, dealers said. Traders may continue to prefer liquid bonds such as the 10-year and 15-year gilts, they said.

The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.25-6.32%. The yield on the most-traded 6.79%, 2034 bond is seen at 6.30-6.40% Tuesday. On Monday, the 6.33%, 2035 bond ended at INR 100.41, or 6.27% yield. The 6.79%, 2034 gilt ended at INR 103.21, or 6.33% yield. 

OIS RATES

On Tuesday, swap rates will track the movement of US Treasury yields and developments in the Iran-Israel conflict, dealers said. Swaps may also track the outcome of the Group of Seven meeting, either indirectly or directly, dealers said. Longer-tenure swaps may also track the movement of gilt yields, dealers said.

Traders will be keen on comments of US Fed officials after the outcome of the FOMC meeting Wednesday.

With domestic rate cuts seen nearly done after the RBI's rate-setting panel delivered a 50 bps cut in repo rate on Jun. 6, traders expect the swap rate curve to flatten slightly, dealers said.

Traders will also track liquidity in the banking system, and the overnight Mumbai Interbank Offer Rate for direction on short-term swap rates. The one-year swap rate is seen in a range of 5.52-5.58% Tuesday. The five-year contract is seen at 5.70-5.80%. On Monday, the one-year swap ended at 5.52%, and the five-year swap ended at 5.73%.

CALL

On Tuesday, 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%. On Monday, the one-day call ended at 4.90%.

RBI AUCTION

--Four states to raise INR 85 billion via bond sale at 1030-1130 IST

LIQUIDITY

--Total net inflows of INR 156.59 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 9.16 billion as coupon on state bonds 

--INR 50.89 billion as coupon on 7.57%, 2033 gilt

--INR 14.97 billion as coupon on 7.69%, 2043 gilt

--INR 49.75 billion as coupon on 6.67%, 2050 gilt

--INR 31.84 billion as coupon on 7.63%, 2059 gilt

* Outflows

--Nil

End

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

Reported by Srijita Bose

Edited by Ashish Shirke

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