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Informist, Tuesday, Jun. 17, 2025

MUMBAI – On Wednesday, government bond prices and overnight indexed swap rates may take cues from overnight movement of US Treasury yields and any developments in the Iran-Israel conflict, dealers said. 

Traders await commentary from US Federal Reserve officials at the outcome of the US Federal Open Market Committee's meeting late Wednesday night. The FOMC is expected to hold interest rates steady at the meeting, but traders will closely track its economic projections for the rest of 2025. The FOMC is largely expected to cut rates twice by the end of December.

On Wednesday, the one-day call rate is likely to open below the RBI's standing deposit facility rate on low demand. During the day, the call rate is seen in a range of 4.80-5.40% and the triparty repo rate in a range of 4.60-5.30%.

GOVERNMENT BONDS

On Wednesday, bond prices are likely to take cues from geopolitical developments. Bond traders remain wary of any escalation in the Israel-Iran conflict, though a surge in crude oil prices has somewhat been priced in, dealers said. Additionally, if the rupee falls sharply against the dollar due to crude oil prices, it may also indirectly hit bond prices, they said. When the market opens, gilts may also take cues from the overnight movement of US yields, dealers said. 

While shorter-tenure bonds somewhat regained favour after the RBI governor's comments, traders may 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 6.22-6.32%. The yield on the most-traded 6.79%, 2034 bond is seen at 6.28-6.40% Wednesday. On Tuesday, the 6.33%, 2035 bond ended at INR 100.47, or 6.26% yield. The 6.79%, 2034 gilt ended at INR 103.27, or 6.32% yield. 

OIS RATES

On Wednesday, swap rates will track the movement of US Treasury yields and developments in the Iran-Israel conflict, dealers said. Longer-tenure swaps may also track the movement of gilt yields, dealers said. Traders will keenly track technical levels as swaps are seen largely range-bound due to lack of domestic cues, they 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 5.40-5.52% Wednesday. The five-year contract is seen at 5.60-5.72%. On Tuesday, the one-year swap ended at 5.48%, and the five-year swap ended at 5.69%.

CALL

On Wednesday, the one-day call rate is likely to open below the RBI's standing deposit facility rate due to low demand. During the day, the call rate is seen in a range of 4.80-5.40% and the triparty repo rate in a range of 4.60-5.30%. On Tuesday, the one-day call ended at 4.95%.

RBI AUCTION

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

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

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

LIQUIDITY

--Total net outflows of INR 50.51 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 12.02 billion as coupon on state bonds 

--INR 22.46 billion as coupon on 7.02%, 2031 gilt

* Outflows

--INR 85.00 billion as payment for state bonds

End

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

Reported by Srijita Bose

Edited by Avishek Dutta

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