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Informist, Thursday, Aug 1, 2024

NEW DELHI – Government bond prices are seen opening steady on Friday ahead of the 220-bln-rupee weekly gilt auction on Friday, dealers said. The government will sell 60 bln rupees of the 7.02%, 2027 gilt, 60 bln rupees of a new 2034 sovereign green bond, and 100 bln rupees of a new 2054 bond.

Overnight indexed swap rates may open steady due to a lack of significant domestic cues. US economic data after Indian market hours may lend cues to swap rates at the open, as these may influence the US interest rate view, dealers said.

US initial unemployment insurance claims for the week ended Jul 27 rose to a near 12-month high of 249,000, against an expectation of 235,000 claims, the same as the previous week. The US ISM Manufacturing Purchasing Managers' Index declined to 46.8 from 48.5 in June, and was lower than expected. A reading above 50 denotes an expansion in activity, while a print below that shows contraction. Any sharp movement in US Treasury yields and crude oil prices may lend cues at the opening.

On Friday, the three-day call money rate may open near the RBI's repo rate of 6.50% because of demand for funds from banks in early trade.

GOVERNMENT BONDS

On Friday, government bond prices may open steady ahead of the 220-bln-rupee weekly gilt auction, dealers said. Demand for long-term bonds will be closely gauged at the auction, after the RBI said the new 2054 bond will not be eligible under the fully accessible route.

Traders may also avoid large bets after recent volatility caused by the RBI circular on foreign portfolio 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.

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 101.27 rupees, or 6.92% yield.

OIS RATES

On Friday, swap rates may open steady amid a lack of firm domestic cues. Swaps may take cues from weekly US unemployment claims data and the US July manufacturing purchasers manager index, dealers said. The data points are important as investors seek reassurance on rate cuts in the US by September, which are fully priced in.

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 Friday, the three-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 5.90%.

RBI AUCTION

--Govt to auction three gilts worth 220 bln rupees

LIQUIDITY

--Total net inflows of 232.84 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

--11.68 bln rupees as coupon on state bonds

--139.00 bln rupees as redemption of 91-day Treasury bills

--43.59 bln rupees as coupon on 7.10%, 2028 sovereign green bond

--38.57 bln rupees as coupon on 6.89%, 2025 gilt

--417.85 bln rupees as reversal of 4-day variable rate reverse repo

--238.55 bln rupees as reversal of 3-day variable rate reverse repo

--70.00 bln rupees as reversal of 2-day variable rate reverse repo

--328.31 bln rupees as reversal of overnight variable rate reverse repo

* Outflows

--Nil

End

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

Reported by Aaryan Khanna

Edited by Tanima Banerjee

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