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Informist, Friday, Jul 19, 2024

MUMBAI – On Saturday, the two-day call money rate may open below the RBI's repo rate of 6.50% because of low demand for funds from banks amid a liquidity surplus. As is usually the case on Saturdays, volume in the market is expected to be low. 

Overnight indexed swaps and government bonds are not traded on Saturdays. On Monday, both swap rates and gilt prices are seen opening steady due to lack of interest rate cues both on global and domestic front, dealers said. 

Any sharp movement in US Treasury yields and crude oil prices may also lend cues to gilts and swaps. Traders may be cautious ahead of the Union Budget for 2024-25 (Apr-Mar), dealers said.

GOVERNMENT BONDS

On Monday, government bond prices are seen opening steady on caution ahead of the Budget, dealers said. However, prices may rise if traders rush to buy bonds before the event, which will be detailed on Tuesday.

A potential borrowing cut in the Budget of around 250 bln rupees from the gross borrowing aim of 14.13 trln rupees outlined in the Interim Budget is expected, dealers said. 

The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.94-7.01% during the day. Today, the bond closed at 100.93 rupees, or 6.96% yield.

OIS RATES

Swap rates are seen opening steady on Monday amid a lack of domestic and offshore rate cues, dealers said. Traders may be cautious ahead of the Union Budget for 2024-25 (Apr-Mar), dealers said.

While the event will not have a direct impact on interest rates, swap rates in the two-year segment and above may be influenced by the government's spending pattern and the impact seen on inflation.

The swap rate in the one-year segment is seen at 6.65-6.80% and in the five-year segment at 6.27-6.42%. Today, the one-year swap rate settled at 6.71% and the five-year swap ended at 6.30%.

CALL

On Saturday, the two-day call money rate may open below the RBI's repo rate of 6.50% because of low demand for funds from banks amid a liquidity surplus. As is usually the case on Saturdays, volume in the market is expected to be low. 

During the day, the call rate is seen in a range of 6.20-6.70%, dealers said. Today, the three-day call rate ended at 6.25%.

RBI AUCTION

--Nil

LIQUIDITY

--Total net inflows of 13.26 bln rupees. Calculation of flows does not take into account redemption of the standing deposit facility and scheduled variable rate repo and reverse repos.

* Inflows

--13.26 bln rupees as coupon on state government securities

* Outflows

--Nil

End

Reported by M.C. Adhiinthran

Edited by Deepshikha Bhardwaj

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