India Money Market Outlook
Two-day call seen below repo rate Sat
This story was originally published at 21:26 IST on 2 August 2024
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NEW DELHI – On Saturday, the two-day call money rate may open below the Reserve Bank of India's repo rate of 6.50% because of low demand for funds from banks amid a liquidity surplus. As is usually the case on Saturdays, volume in the market is expected to be low.
During the day, the call rate is seen in a range of 6.20-6.60%, dealers said. Today, the three-day call rate ended at 6.10%.
Overnight indexed swaps and government bonds are not traded on Saturdays. On Monday, government bond prices may rise and swap rates may fall after key US jobs data was much softer than expected, compounding the case for rate cuts in the world's largest economy.
GOVERNMENT BONDS
On Monday, bond prices are likely to shoot up after US Treasury yields slumped, following non-farm payrolls that were much softer than expected, dealers said.
The US added 114,000 jobs in July, against a consensus estimate of 175,000 jobs in a Reuters poll. The unemployment rate rose to 4.3% in July from 4.1% in June. The poor data has pulled down the US 10-year benchmark Treasury yields more than 10 basis points to 3.83% as at 2000 IST.
The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.83-6.90% during the day. Today, the bond closed at 101.42 rupees, or 6.89% yield. The yield closed at its lowest since Mar 31, 2022.
OIS RATES
Swap rates may open lower on Monday after the US non-farm payrolls data increased hopes of an even greater rate cut in the US than the 50 bps already priced in for 2024.
The swap rate in the one-year segment is seen at 6.50-6.70% and in the five-year segment at 6.05-6.30%. Today, the one-year swap rate settled at 6.62% and the five-year swap ended at 6.15%, both at six-month lows.
RBI AUCTION
--Nil
LIQUIDITY
--Total net inflows of 40.92 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
--5.43 bln rupees as coupon on state bonds
--35.49 bln rupees as coupon on 7.59%, 2026 gilt
* 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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