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Informist, Friday, Jun. 27, 2025

MUMBAI – Government bond prices and overnight indexed swap rates may take cues from the movement in US Treasury yields on Monday, dealers said. Money markets are shut on Saturday.

In data released after Indian market hours, the US core Personal Consumption Expenditures inflation price index, the preferred gauge of inflation for the Federal Reserve, rose 2.7% on year against the median forecast of 2.6%. Comments from US Fed officials would also be closely watched as Fed funds futures reflect around a 20% chance of the US Federal Open Market Committee cutting policy rates in June, according to the CME FedWatch tool.

The Reserve Bank of India's liquidity management will also be keenly watched after the central bank Friday conducted its first variable rate reverse repo operation since November. The movement in crude oil prices may also lend cues, dealers said.

On Monday, the one-day call rate may open slightly below the RBI's repo rate due to quarter-end demand. During the day, the call rate is seen in a range of 5.20-5.70% and the tri-party repo rate in a range of 5.00-5.50%.

GOVERNMENT BONDS

On Monday, bond prices may take cues from the movement in US Treasury yields after the release of key US data, dealers said. Gilt prices may rise after the Centre's calendar for Treasury bill issuances and states' indicative calendar for borrowing for Jul-Sept were slightly lower than expected.

The RBI post-market said states will borrow a total of INR 2.87 trillion, against market expectations of around INR 3 trillion. This is expected to favour long-term gilts, dealers said. Traders will now watch for any further announcement of variable rate reverse repo auctions by the RBI. Gross T-bill issuances in Jul-Sept at INR 2.69 trillion Jul-Sept are unlikely to move bond prices, dealers said. 

Gilts will also take cues from any developments in West Asia, dealers said. Brent crude futures for August delivery are expected to stay below $70 a barrel with the ceasefire between Israel and Iran holding so far.

The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.28-6.35% Monday and that on the most-traded 6.79%, 2034 bond is seen at 6.33-6.42%. On Friday, the 2035 bond ended at INR 100.11 or 6.31%, while the 2034 bond ended at INR 102.71 or 6.40%. 

OIS RATES

Swap rates are not traded on Saturdays. On Monday, swap rates are likely to take cues from the movement in US Treasury yields. The daily MIBOR fixing will lend cues after the initial hours.

On the global front, Brent crude futures for August delivery are expected to stay below $70 a barrel as the conflict between Israel and Iran is seen ending. Comments from Fed officials on further rate cuts will continue to be tracked closely as expectations of a July rate cut in the US have increased over the past week.

Swap rates may also track the movement of gilt yields, which rose Friday. The one-year swap rate is seen in the range of 5.46-5.60% Monday. The five-year contract is seen at 5.62-5.84%. On Friday, the one-year swap ended at 5.55%, and the five-year swap ended at 5.71%.

CALL

The call market is shut on Saturday. On Monday, the one-day call rate may open slightly below the RBI's repo rate due to quarter-end demand. During the day, the call rate is seen in a range of 4.90-5.40% and the tri-party repo rate in a range of 4.80-5.30%. On Friday the three-day call rate ended at 5.05%, while the tri-party repo rate ended at 5.50%.

RBI AUCTION

--Nil

LIQUIDITY

--Total net outflows of INR 257.72 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 31.95 billion as coupon on state bonds on Saturday

--INR 12.98 billion as coupon on state bonds on Sunday

--INR 3.31 billion as coupon on state bonds on Monday

--INR 10.19 billion as coupon on 6.79%, 2031 gilt on Monday

--INR 43.87 billion as coupon on 8.30%, 2042 gilt on Monday

* Outflows

--INR 360.00 billion as payment for gilts on Monday

End

US$1 = INR 85.48

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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