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Informist, Monday, Aug 12, 2024

MUMBAI – Government bond prices may open slightly higher as India's CPI inflation was lower than expected, dealers said. Data released after market hours showed the CPI inflation fell to 3.54% in July from 5.08% in June. Core inflation rose to 3.4% in July from 3.1% the previous month.

Swap rates may open lower after India's CPI inflation print came in lower than expected. US inflation and retail sales data for July are also awaited later this week for a better sense of the trajectory of rate cuts in the world's largest economy, dealers said.

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 Tuesday, bond prices may open slightly higher as India's CPI inflation was lower than expected, dealers said. Data released after market hours showed the CPI inflation fell to 3.54% in July from 5.08% in June. Core inflation rose to 3.4% from 3.1% the previous month.

With the July CPI inflation print at a 59-month-low, headline inflation in the September quarter may fall below the central bank's estimates. This could prompt a quicker easing of policy rates than earlier expected, dealers said. The RBI had raised its CPI inflation projection for Jul-Sep by 60 bps to 4.40% at last week's monetary policy review.

Any sharp movement in US Treasury yields and crude oil prices may also lend cues at the opening. The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.83-6.90% during the day.

OIS RATES

On Tuesday, swap rates may open lower after India's CPI inflation print was lower than expected. US inflation and retail sales data for July are also awaited later this week for a better grasp of the trajectory of rate cuts in the world's largest economy, dealers said.

Any sharp movement in US Treasury yields and crude oil prices may also lend cues at the opening. The swap rate in the one-year segment is seen at 6.43-6.63% and in the five-year segment at 6.00-6.25%.

CALL

On Tuesday, 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. However, the rates may ease during the day owing to surplus liquidity in the banking system. During the day, the call rate is seen in a range of 6.00-6.60%, dealers said.

LIQUIDITY

--Total net inflows of 50.58 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

--4.08 bln rupees as coupon on state bonds

--46.5 bln rupees as redemption of state bonds

* Outflows

-- No outflows

End

Reported by Kabir Sharma

Edited by Rajeev Pai

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