More Stories

Informist, Wednesday, Jul 31, 2024

NEW DELHI – Government bond prices and overnight indexed swap rates on Thursday may take cues from the US Federal Open Market Committee meeting's outcome, scheduled at 2330 IST today, dealers said. The committee is likely to keep policy rates unchanged at 5.25-5.50%, 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. Any sharp movement in US Treasury yields and crude oil prices may lend cues at the opening.

On Thursday, 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 trade.

GOVT BONDS

On Thursday, government bond prices may take cues from the US FOMC outcome, dealers said. The committee is likely to keep policy rates unchanged but may make note of falling inflation and employment in recent months. This could set the stage for a rate cut at the next policy meeting in September, dealers said.

Any signal of an imminent rate cut may also help pull down domestic bond yields. Some traders are already betting on the RBI's Monetary Policy Committee to begin cutting rates by December, 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. Traders look ahead to the 220-bln-rupee bond auction on Friday.

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 101.20 rupees, or 6.93% yield.

OIS RATES

On Thursday, swap rates may take cues from the US Federal Reserve policy meeting outcome, due at 2330 IST, dealers said. The US rate-setting panel is expected to keep the interest rate unchanged at 5.25-5.50%. 

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 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 6.67% and the five-year swap ended at 6.22%.

CALL

On Thursday, 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 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 6.50%.

RBI AUCTION

--Nil

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

--13.92 bln rupees as coupon on state bonds

--110.00 bln rupees as redemption of 182-day Treasury bills

--62.46 bln rupees as redemption of 364-day Treasury bills

* Outflows

--87.00 bln rupees as payment for 91-day Treasury bills

--76.25 bln rupees as payment for 182-day Treasury bills

--63.45 bln rupees as payment for 364-day Treasury bills

End

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

Reported by Aaryan Khanna

Edited by Aditya Sakorkar

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.