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Informist, Tuesday, Aug 13, 2024

MUMBAI – Government bond prices and overnight indexed swap rates are seen opening steady Wednesday on caution ahead of US CPI data. A poll by Reuters sees the US headline inflation rising 0.2% on month in July but unchanged at 3% on a year-on-year basis.

Any sharp movement in US Treasury yields and crude oil prices may also lend cues at the opening.

On Wednesday, the two-day call money rate may open near the Reserve Bank of India's repo rate of 6.50% because of demand for funds from banks early in the day.

GOVERNMENT BONDS

On Wednesday, bond prices may open steady ahead of US CPI inflation, which is expected to rise 0.2% on month in July but remained unchanged at 3% year-on-year. Bonds may take also cues from the US Producer Price Index for July released at 1800 IST.

The Producer Price Index for final demand in the US rose 2.2% on a yearly basis in July, according to US Bureau of Labor Statistics data. This reading was below the market expectation of 2.3% and the 2.7% increase in June. The annual core PPI rose 2.4% in July, short of analysts' estimate of 2.7%.

The two data points are likely to provide fresh insights into the possible rate trajectory of the US Federal Reserve, dealers said.

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 101.53 rupees, or 6.88% yield.

OIS RATES

On Wednesday, swap rates may take cues from the US Producer Price Index. Traders may remain on the sidelines ahead of US CPI data for July.

The data points are likely to give a clearer picture of the trajectory of rate cuts in the world's largest economy, dealers said. A poll by Reuters sees the US CPI rising 0.2% on month in July but unchanged at 3% on a year-on-year basis.

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%. Today, the one-year swap rate closed at 6.53% and the five-year at 6.12%.

CALL

On Wednesday, the two-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 intraday owing to comfortable liquidity in the banking system. Indian financial markets are closed Thursday on account of Independence Day.

During the day, the call rate is seen in a range of 6.00-6.60%, 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 75.16 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

--72.16 bln rupees as coupon on 6.54%, 2032 bond

--12.18 bln rupees as coupon on state-government security

--58.10 bln rupees as redemption for overnight variable rate reverse repo

* Outflows

--159.50 bln rupees as payment for state bonds

End

Reported by Siddhi Chauhan

Edited by Ashish Shirke

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