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Informist, Tuesday, Aug 6, 2024

MUMBAI – Government bond prices and overnight indexed swap rates are expected to open steady on Wednesday ahead of the three-day Monetary Policy Committee meeting outcome on Thursday. The Reserve Bank of India's rate-setting panel is expected to maintain status quo on rates and stance, according to an Informist poll.

The policy repo rate is 6.50%, and the stance is withdrawal of accommodation. Both gilts and OIS traders are betting on a change in stance to neutral at the policy outcome on Thursday. Any further movement in US Treasury yields and crude oil prices may lend cues at the opening for gilts and swaps.

On Wednesday, the one-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 Wednesday, bond prices are likely to open steady as traders may remain cautious ahead of the outcome of the three-day meeting of the Monetary Policy Committee on Thursday, dealers said. Analysts expect the panel to maintain status quo on both the repo rate, at 6.50%, and policy stance at "withdrawal of accommodation."

Traders are expecting the committee to change its stance to "neutral" from "withdrawal of accommodation". However, if the domestic rate setting panel does not change the stance, it may trigger some selling in the market and the yield on the 10-year benchmark may inch to 6.90%.

The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.83-6.92% during the day. Today, the bond closed at 101.55 rupees, or 6.88% yield.

OIS RATES

On Wednesday, swap rates may open steady ahead of the Monetary Policy Committee meeting outcome on Thursday. Increasingly, traders are betting on a stance change to "neutral" from "withdrawal of accommodation". The repo rate is expected to be maintained at 6.50%.

The swap rate in the one-year segment is seen at 6.45-6.63% and in the five-year segment at 6.05-6.30%. Today, the one-year swap rate settled at 6.52% and the five-year swap ended at 6.12%.

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 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 6.20-6.60%, 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 220.52 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

--11.48 bln rupees as coupon for state bonds

--199.54 bln rupees as redemption for overnight variable rate reverse repo

* Outflows

--232.00 bln rupees as payment for state bonds

End

Reported by Aaryan Khanna

Edited by Aditya Sakorkar

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