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Informist, Wednesday, Jun. 18, 2025

MUMBAI – Government bond prices and overnight indexed swap rates on Thursday will take cues from the overnight movement of US Treasury yields after the outcome of the US Federal Open Market Committee meeting late Wednesday, dealers said. While the FOMC is widely expected to keep rates steady, traders said they would keenly track the commentary from US Federal Reserve officials and the economic and rate cut projections, dealers said.

According to reports, the Federal Reserve is expected to maintain its view that monetary policy remains in a good position, but uncertainty persists. Meanwhile, US data showed a fall in weekly jobless claims for the week ended Saturday to 245,000, in line with estimates. The jobless data, which is usually released on Thursday, was released a day earlier as US markets will be shut on Thursday on the occasion of Juneteenth National Independence Day.

Traders will keenly track developments in the Iran-Israel conflict, dealers said. Gilts and swap rates will also track the movement of the rupee against the dollar, they said.

On Thursday, 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%.

GOVERNMENT BONDS

On Thursday, bond prices are likely to take cues from the overnight movement in US yields after the outcome of the US FOMC meeting, dealers said

Gilts will also keenly track geopolitical developments. Bond traders remain wary of any escalation in the Israel-Iran conflict, though a surge in crude oil prices has been priced in to an extent, dealers said. Additionally, if the rupee falls sharply against the dollar due to a rise in crude oil prices, it may also indirectly hit bond prices, they said. 

With uncertainty on the geopolitical front, traders may continue to prefer liquid bonds such as the 10-year and 15-year gilts, dealers said. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.22-6.35%. The yield on the most-traded 6.79%, 2034 bond is seen at 6.28-6.40% Thursday. On Wednesday, the 6.33%, 2035 bond ended at INR 100.49, or 6.26% yield. The 6.79%, 2034 gilt ended at INR 103.25, or 6.32% yield. 

OIS RATES

On Thursday, swap rates will track the movement in US yields after the FOMC outcome. Traders will also track developments in the Iran-Israel conflict, dealers said. Longer-tenure swaps may also track the movement in gilt yields, dealers said. Traders will keenly track technical levels as swaps are seen largely range-bound due to a 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% Thursday. The five-year contract is seen at 5.60-5.80%. On Wednesday, the one-year swap ended at 5.48%, and the five-year swap ended at 5.68%.

CALL

On Thursday, 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 Wednesday, the one-day call ended at 5.10%.

RBI AUCTION

Nil

LIQUIDITY

--Total net inflows of INR 157.54 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 140.00 billion on 91-day Treasury bills

--INR 68.00 billion on 182-day T-bills

--INR 54.15 billion on 364-day T-bills

--INR 14.46 billion as coupon on state bonds

--INR 43.50 billion as coupon on 7.73%, 2034 gilt

--INR 57.46 billion as coupon on 7.41%, 2036 gilt

--INR 71.18 billion as coupon on 7.30%, 2053 gilt

* Outflows

--INR 153.00 billion as payment for 91-day T-bills

--INR 78.00 billion as payment for 182-day T-bills

--INR 60.20 billion as payment for 364-day T-bills

End

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

Reported by Srijita Bose

Edited by Saji George Titus

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