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Informist, Wednesday, Jul. 9, 2025

MUMBAI – Government bond prices and overnight indexed swap rates are likely to track the overnight movement in US Treasury yields after the minutes of the US Federal Open Market Committee meeting are released at 2330 IST Wednesday, dealers said.

Updates on a preliminary US-India trade deal before President Donald Trump's tariffs are implemented Aug. 1 will be closely tracked, they said. Traders expect the US and India to strike a preliminary trade deal soon. This is likely to help the rupee appreciate and also result in some foreign portfolio investment inflows into both equities and fixed-income, dealers said. Any sharp movement in crude oil prices may also lend cues.

The Reserve Bank of India's actions on liquidity are being keenly watched by traders after the central bank held a two-day, INR 1.00-trillion variable rate reverse repo auction Wednesday, which drove up money market rates. Traders now expect the central bank to roll over the maturity of INR 2.00 trillion through a seven-day VRRR auction of around INR 1.50 trillion-INR 2.00 trillion Friday, dealers said.

Traders also await with interest the development of a collateralised money market benchmark. Financial Benchmarks India Ltd. published the new benchmark Secured Overnight Rupee Rate for the first time Monday, and it was set at 5.16%, below the standing deposit facility rate. 

On Thursday, the one-day call rate may open slightly below the RBI's repo rate due to comfortable liquidity. 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%.

GOVERNMENT BONDS

Bond prices may open steady Thursday amid a lack of significant domestic cues as traders await updates on a preliminary US-India trade deal. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.28-6.35% Thursday and that on the most-traded 6.79%, 2034 bond is seen at 6.35-6.42%. Wednesday, the 6.33%, 2035 bond ended at INR 100.11, or 6.31%, while the 6.79%, 2034 bond ended at INR 102.82, or 6.38%.

OIS RATES

Thursday, swap rates are likely to take cues from the overnight movement in US yields after the minutes of the US FOMC's June meeting due after market hours. The overnight Mumbai Interbank Offer Rate fixing will also lend cues after the initial trading hours.

Swap rates may also track the movement of gilt yields. The one-year swap rate is seen in the range of 5.46-5.60% Thursday. The five-year contract is seen at 5.68-5.78%. Wednesday, the one-year swap ended at 5.53% and the five-year swap at 5.70%.

CALL

On Thursday, the one-day call rate may open slightly below the RBI's repo rate due to comfortable liquidity. 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%. Wednesday, the one-day call money rate ended at 5.00%, while the tri-party repo rate ended at 5.27%.

RBI AUCTION

--Nil

LIQUIDITY

--Total net outflows of INR 135.15 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 93.00 billion as redemption of 182-day Treasury bills

--INR 64.12 billion as redemption of 364-day Treasury bills

--INR 13.16 billion as coupon on state bonds

* Outflows

--INR 148.00 billion as payment for 91-day T-bills

--INR 83.00 billion as payment for 182-day T-bills

--INR 74.42 billion as payment for 364-day T-bills

End

Reported by Cassandra Carvalho

Edited by Rajeev Pai

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