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Informist, Wednesday, Aug 14, 2024

MUMBAI – Government bond prices may open steady on Friday ahead of the 340-bln-rupee weekly gilt auction at 1030-1130 IST, dealers said. The government will sell 110 bln rupees of the 7.02%, 2031 bond, 120 bln rupees of 7.23%, 2039 bond, and 110 bln rupees of the 7.46%, 2073 gilt through auction. Indian financial markets will remain closed on Thursday for Independence Day. 

Overnight indexed swap rates may open steady after US CPI inflation for July failed to lend an insight into the US interest rate trajectory, dealers said. Any sharp movement in US Treasury yields and crude oil prices may also lend cues to gilts and swaps at the opening on Friday. 

US CPI rose 0.2% on month, in line with expectation, and did not significantly shift the view on interest rates. Core CPI inflation was 0.2% on month and 3.2% on year, also in line. However, the headline CPI rose 2.9% on an annual basis, slightly lower than the expected 3.0%.

The expectation of a 50-basis-point rate cut in the US in September had fallen to 43.5% from above 50% before the reading, according to the CME FedWatch tool. The data still showed a rate cut of at least 25 bps was fully priced in.

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, bond prices may open steady ahead of the 340-bln-rupee weekly gilt auction at 1030-1130 IST, dealers said. Traders may book profits on Friday after prices rose today. Demand for gilts at the auction is expected to be robust, 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 101.68 rupees, or 6.86% yield.

OIS RATES

On Friday, swap rates may open steady as the reaction to US CPI inflation for July was muted. With the data in line with expectations, the market's view on the rate cut trajectory had not changed significantly, dealers said.

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 6.52% and the five-year at 6.08%.

CALL

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. However, the rates may ease intraday owing to comfortable liquidity in the banking system.

During the day, the call rate is seen in a range of 6.00-6.60%, dealers said. Today, the two-day call money rate ended at 5.75%.

RBI AUCTION

--Govt to auction three gilts worth 340 bln rupees

LIQUIDITY

--Total net inflows of 124.30 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

--14.68 bln rupees as coupon on state bonds

--52.39 bln rupees as coupon on 8.33%, 2026 bond

--43.64 bln rupees as coupon on 8.40%, 2024 bond

--124.00 bln rupees as redemption of 91-day T-bills

--100.00 bln rupees as redemption of 182-day T-bills

--77.91 bln rupees as redemption of 364-day T-bills

--9.79 bln rupees as coupon on state bonds

--429.70 bln rupees as redemption of 4-day variable rate reverse repo

--166.95 bln rupees as redemption of 3-day variable rate reverse repo

--228.82 bln rupees as redemption of 2-day variable rate reverse repo

--75.75 bln rupees as redemption of 2-day variable rate reverse repo

* Outflows

--140.47 bln rupees as payment for 91-day T-bills

--70.00 bln rupees as payment for 182-day T-bills

--87.64 bln rupees as payment for 364-day T-bills

End

Reported by Aaryan Khanna

Edited by Deepshikha Bhardwaj

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