More Stories

Informist, Monday, Jul 22, 2024

MUMBAI – On Tuesday, government bond prices and overnight indexed swaps are seen opening steady on caution ahead of the Budget, dealers said. Finance Minister Nirmala Sitharaman will present the Budget in Parliament at 1100 IST.

The Budget may lend cues on the inflation outlook, but is otherwise not seen as a major factor for swap rates, dealers said. A potential borrowing cut in the Budget of 250-300 bln rupees from the gross borrowing aim of 14.13 trln rupees outlined in the Interim Budget is expected, dealers said. 

A section of the market expects the government to announce a cut in borrowing through Treasury bills, rather than dated securities, dealers said. This is because it would be too early for the Centre to be sure of the demand throughout the fiscal year. It would rather wait till the end of the financial year to announce the cuts, or cancel the last few auctions, they added.

In case the government does not announce any cut in borrowing via dated securities, the yield on the benchmark 10-year paper may rise to 7.02%, dealers said. If the reduced borrowing amount is lower than expected, the yield on the benchmark paper may fall to 6.94%.

According to an Informist poll, the respondents expect the government to lower its fiscal deficit target to 5.0% of the GDP from 5.1% in the Interim Budget. In the gilt market, there were a few bets on the fiscal deficit target going as low as 4.9% of the GDP. However, the majority see the target at 5.0% of the GDP for the financial year ending March, dealers said.

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

GOVERNMENT BONDS

On Tuesday, government bond prices are seen opening steady on caution ahead of the Budget, dealers said. Sitharaman will present the Budget in Parliament at 1100 IST.

A potential borrowing cut in the Budget of 250-300 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 6.94-7.02% during the day. Today, the bond closed at 100.92 rupees, or 6.97% yield.

OIS RATES

Swap rates are seen opening steady Tuesday before the presentation of the Union Budget. The Budget may lend cues on the inflation outlook, but is otherwise not seen as a major factor for swap rates, dealers said.

With the gross borrowing expected to be cut in the Budget, traders have received fixed rates heading into the event. An adverse surprise on the borrowing may lead to a spike in OIS rates, dealers said.

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%. Today, the one-year swap rate settled at 6.73% and the five-year swap ended at 6.32%.

CALL

On Tuesday, the one-day call money rate may open near the RBI's repo rate of 6.50% because of the demand for funds from banks early in the trade. However, the rates may ease intraday owing to prevailing surplus liquidity in the banking system.

During the day, the call rate is seen in a range of 6.20-6.75%, dealers said. Today, the one-day call rate ended at 6.55%.

RBI AUCTION

--Seven states to raise 121 bln rupees via bond sale.

LIQUIDITY

--Total net inflows of 89.78 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

--2.78 bln rupees as coupon on state government securities

--87.00 bln rupees as redemption of state government securities

* Outflows

--Nil

End

Reported by Nishat Anjum

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.