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Informist, Saturday, Jun. 21, 2025

MUMBAI – On Monday, bonds and swap rates are likely to take cues from developments in the Israel-Iran conflict over the weekend, dealers said. Market participants remain wary of any escalation in the conflict, with fears that crude oil prices could rise to $90-$100 per barrel if the situation worsens or the conflict widens.

Traders will also take cues from the minutes of the Reserve Bank of India's Monetary Policy Committee meeting in June, released post market hours Friday. The market participants will also keep an eye on US Treasury yields. Traders will take cues from the movement of US yields Friday after the Federal Open Market Committee decided to keep the federal funds target rate unchanged on Wednesday, dealers said. US markets were closed on Thursday on account of Juneteenth holiday.

GOVERNMENT BONDS

On Monday, bonds are likely to take cues from developments in the Israel-Iran conflict over the weekend, dealers said. Bond traders remain wary of any escalation in the conflict, with fears that crude oil prices could rise to $90-$100 per barrel if the situation worsens or the conflict widens, dealers said. Moreover, 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.

Traders will also take cues from US Treasury yields. US markets were closed on Thursday. Traders will take cues from the movement of US yields Friday after the Federal Open Market Committee decided to keep the federal funds target rate unchanged on Wednesday, dealers said.

The RBI on Friday said nine states will aim to raise INR 272 billion through an auction Tuesday, lower than the indicated amount of INR 301 billion stated in the Apr-Jun state bond auction calendar. Longer tenure bonds may fall Monday as some market participants had expected an even lesser size of Tuesday's state bond auction, dealers said.

Amid uncertainty on the geopolitical front, 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 6.28-6.35%. The yield on the most-traded 6.79%, 2034 bond is seen at 6.30-6.42% Monday. On Friday, the 6.33%, 2035 bond ended at INR 100.15, or 6.31%. The 6.79%, 2034 bond ended at INR 102.83, or 6.38%. 

OIS RATES

On Monday, swap rates will track developments in the Israel-Iran conflict, dealers said. Swaps may also track the movement of gilt yields. Traders will also take cues from the minutes of the RBI's Monetary Policy Committee meeting in June, released post market hours Friday. Traders will keenly track technical levels as swaps are seen largely in range due to lack of domestic cues. Swap rates will also track the movement of the rupee against the dollar.

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 5.45-5.58% Monday. The five-year contract is seen at 5.60-5.80%. The one-year swap rate ended at 5.52% and the five-year swap ended at 5.75% on Friday.

CALL

On Monday, the one-day call money 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 5.00-5.75%, dealers said. On Saturday, the two-day call ended at 4.90%. 

RBI AUCTION

--Nil

LIQUIDITY

--Total net outflows of INR 151.04 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 11.05 billion as coupon on state bonds

--INR 39.84 billion as coupon on 8.13%, 2045 gilt

--INR 17.23 billion as coupon on state bonds

--INR 14.18 billion as coupon on 6.75%, 2029 gilt

--INR 36.68 billion as coupon on 9.23%, 2043 gilt

* Outflows

--INR 270.00 billion as payment for gilts

End

Reported by Sachi Pandey

Edited by Tanima Banerjee

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