More Stories

Informist, Tuesday, Jul 30, 2024

NEW DELHI – Government bond prices and overnight indexed swap rates may open steady on Wednesday ahead of the US Federal Open Market Committee meeting's outcome at 2330 IST, dealers said. The committee is likely to keep policy rates unchanged but may make a note of falling inflation and employment in recent months.

This could set the stage for a rate cut in the US at the next policy meeting in September, dealers said. According to the CME FedWatch tool, Fed funds traders have fully priced in at least a 25-basis-point rate cut by September, along with one more rate cut in 2024.

The Bank of Japan rate decision early on Wednesday is also awaited. Any sharp movement in US Treasury yields and crude oil prices may lend cues at the opening.

On Wednesday, 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.

GOVT BONDS

On Wednesday, government bond prices may open steady on caution ahead of the US FOMC meet outcome, dealers said.

Traders may also avoid large bets after recent volatility caused by the RBI circular on FPI investment in long-term bonds and the draft norms on liquidity coverage ratio. Short-term bonds remain in favour, while long-term bond prices are expected to continue falling, dealers said.

Meanwhile, the monetary policy review by the Bank of Japan early on Wednesday may also provide a fresh cue on the interest rate front, dealers said. The central bank is likely to raise its policy rate by 10 bps to 0.1%, according to a Reuters poll.

The 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 101.15 rupees, or 6.93% yield.

OIS RATES

On Wednesday, swap rates may open steady as traders are likely to maintain caution ahead of the US FOMC meeting outcome, dealers said.

Traders are also waiting for the Bank of Japan's policy outcome on Wednesday, which may see the central bank increase interest rates, dealers said. Economists polled by Reuters expect the Japanese central bank to increase its benchmark interest rate to 0.1% from the current range of 0.0-0.1%.

The Bank of England is also set to detail its policy review on Thursday. The central bank's first interest rate cut since 2020 hangs in the balance amid increased uncertainty, as key policymakers have not spoken publicly for more than two months due to rules in the run-up to the general election.

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 6.69% and the five-year swap ended at 6.26%.

CALL

On Wednesday, 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 5.75%.

RBI AUCTION

--RBI to auction 91-day T-bills worth 80 bln rupees

--RBI to auction 182-day T-bills worth 60 bln rupees

--RBI to auction 364-day T-bills worth 60 bln rupees

LIQUIDITY

--Total net outflows of 274.62 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

--20.38 bln rupees as coupon on state bonds

* Outflows

--295.00 bln rupees as payment for state bonds

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Aaryan Khanna

Edited by Akul Nishant Akhoury

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 (11) 4220-1000

Send comments to feedback@informistmedia.com

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