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Informist, Friday, Aug 16, 2024

MUMBAI – 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 liquidity surplus in the banking system. 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 the range of 6.00-6.60%, dealers said. Today, the three-day call rate ended at 6.20%.

Overnight indexed swaps and government bonds are not traded on Saturdays. On Monday, gilts and swaps may take cues from US state employment and unemployment data released today.

GOVERNMENT BONDS

On Monday, gilts may take cues from US state employment and unemployment data which were released today. Investors will also look forward to the University of Michigan Survey of Consumers preliminary data for August, also released today,  which will provide more clarity on the trajectory of rates in the world's largest economy.

If US economic data continues to be robust, it would further dampen hope of significant rate cuts by the Fed, causing a rise in US bond yields and, in turn, Indian bond yields. However, the appetite for domestic bonds is likely to remain strong due to a steady stream of foreign fund inflows on account of India's inclusion in JP Morgan's emerging market index suite, a 10-month process that started on Jun 28.

Any uptick in yields may also prompt purchases by domestic banks which will have to maintain larger buffers of liquid assets such as government securities due to an impending tightening of the liquidity coverage ratio guidelines.

In the event of disappointing US economic data, a possible fall in US Treasury yields may drag down domestic bond yields on Monday. The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.84-6.88% during the day. Today, the 10-year benchmark ended at 6.87%.

OIS RATES

On Monday, they may take cues from US state employment and unemployment data. The preliminary data of the University of Michigan Survey of Consumers for August are also likely to lend cues to the market. 

Traders will now look forward to comments from Fed officials in the coming weeks to gauge their view on the economy and interest rates. The Federal Reserve Bank of Chicago President Austan Goolsbee is scheduled to deliver a speech at 2255 IST.

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%. Today, the one-year swap rate ended at 6.53%, while the five-year swap rate ended at 6.11%.

RBI AUCTION

--Nil

LIQUIDITY

--Total net inflows of 7.43 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

--7.43 bln rupees as coupon on state bonds

* Outflows

--Nil

End

Reported by Siddhi Chauhan

Edited by Tanima Banerjee

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