More Stories

Informist, Saturday, Jul 20, 2024

MUMBAI – On Monday, prices of government bonds and overnight indexed swaps may open steady on caution ahead of the Union Budget for 2024-25 (Apr-Mar) 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 Budget 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 markets may also take cues from comments of US Federal Reserve Bank of San Francisco President Mary Daly. She said that more confidence is required to see progress towards achieving the target of 2% inflation before calling for an interest rate cut.

Any sharp movement in crude oil prices may also lend cues at the opening. Any sharp movement in US yields and crude oil prices may lend cues to gilts and swaps.

On Monday, the one-day call money rate may open above the Reserve Bank of India's repo rate of 6.50% due to strong demand for funds from banks early in the day.

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 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.

Any sharp movement in US Treasury yields and crude oil prices may also lend cues at the opening. The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.94-7.01% during the day. On Friday, the bond closed at 100.93 rupees, or 6.96% yield.

OIS RATES

Swaps are seen opening steady on Monday due to lack of domestic and offshore rate cues, dealers said. Traders may be cautious ahead of the Union Budget, 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.

Any sharp movement in US Treasury yields and crude oil prices may also lend cues at the opening. 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%. On Friday, the one-year swap rate settled at 6.71% and the five-year swap ended at 6.30%.

CALL

On Monday, the one-day call money rate may open above the RBI's repo rate of 6.50% due to strong demand for funds from banks early in the trade. During the day, the call rate is seen at 6.20-6.70%, dealers said. Today, the two-day call rate ended at 5.75%.

RBI AUCTION

--Nil

LIQUIDITY

--Total net outflows of 309.99 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

--8.71 bln rupees as coupon on state government securities

--3.70 bln rupees as coupon on 7.37%, 2054 green bond

--5.00 bln rupees as coupon on state government securities

--337.05 bln rupees as reversal of three-day variable rate reverse repo

* Outflows

--310.00 bln rupees as payments for gilts auctioned on Friday 

End

Reported by Anupreksha Jain

Edited by Ashish Shirke

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.