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Informist, Monday, Jul 29, 2024

MUMBAI – On Tuesday, government bond prices may open on a mixed note, dealers said. In a notification after market hours today, the Reserve Bank of India said it would exclude new 14- and 30-year bonds from the fully accessible route that does not have limits for foreign investment.

Overnight indexed swap rates may open steady due to a lack of cues on interest rates, ahead of key monetary policy reviews in the US and Japan on Wednesday. Any sharp movement in US Treasury yields and crude oil prices may also lend cues at the opening.

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 in early trades.

GOVERNMENT BONDS

On Tuesday, government bond prices may open on a mixed note. Prices of bonds maturing in 14 and 30 years may open lower after the RBI said it would exclude future issuances of such securities under the Fully Accessible Route, which have no limits for investment by foreigner portfolio investors.

This may prove beneficial for currently issued bonds, and also for bonds maturing in under 14 years as these are likely to be the target of foreign portfolio investors. Meanwhile, monetary policy reviews in the US and Japan on Wednesday are closely awaited for fresh cues on the interest rate front, dealers said.

Yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.88-6.96% during the day. Today, the bond closed at 101.25 rupees, or 6.92% yield. This was the lowest close for the benchmark yield in over two years.

OIS RATES

On Tuesday, swap rates may open steady due to a lack of firm cues for the day, dealers said. Traders are likely to maintain caution ahead of the US Federal Open Market Committee meeting later in the week.

Traders also await the Bank of Japan's policy review later this week, where they expect the central bank to hike interest rates.

The swap rate in the one-year segment is seen at 6.60-6.80% and in the five-year segment at 6.20-6.35%. Today, the one-year swap rate settled at 6.68% and the five-year swap ended at 6.24%.

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 in early trades. 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 6.25%.

RBI AUCTION

--Ten states to raise 295 bln rupees via bond sale on Tue

LIQUIDITY

--Total net inflows of 362.91 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

--5.57 bln rupees as coupon on state bonds

* Outflows

--Nil

End

Reported by Aaryan Khanna

Edited by Akul Nishant Akhoury

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