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Informist, Monday, Aug 19, 2024

NEW DELHI – Government bond prices and overnight indexed swap rates are seen opening steady on Tuesday ahead of an event-heavy week that may be significant for gauging the interest rate trajectory in the US and India, dealers said.

The minutes of the US Federal Open Market Committee's latest meeting are due at 2330 IST on Wednesday. Meanwhile, the minutes of India's Monetary Policy Committee's meeting earlier in August are due on Thursday.

Finally, several US Federal Reserve officials, including Federal Reserve Chair Jerome Powell, are scheduled to speak at the Jackson Hole Economic Symposium that starts Thursday. Their comments would be a key gauge for the US central bank's stance on interest rates and the broader economic outlook, dealers said. A rate cut in the US is still seen as a pre-requisite for India to begin softening its monetary policy, they said.

On Tuesday, the one-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 in early trade.

GOVERNMENT BONDS

On Tuesday, gilts may open steady as traders remain cautious during a busy week full for triggers on the interest rate view, dealers said. These include minutes from the latest US and India monetary policy reviews, as well as the Jackson Hole Economic Symposium in the US.

The appetite for domestic bonds is likely to remain strong amid a steady stream of foreign fund inflows due to 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.

The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.84-6.88% during the day. Today, the bond closed at 101.62 rupees, or 6.87% yield.

OIS RATES

Swap rates may open steady on Tuesday as traders remain cautious ahead of potentially significant cues on the interest rate view, dealers said. These include minutes from the latest US and India monetary policy reviews, as well as the Jackson Hole Economic Symposium in the US that starts Thursday.

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 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 intraday owing to comfortable liquidity in the banking system.

During the day, the call rate is seen in a range of 6.20-6.75%, dealers said. Today, the one-day call money rate ended at 5.85%.

RBI AUCTION

--Seven states to raise 137.90 bln rupees via bond sale

LIQUIDITY

--Total net inflows of 9.20 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

--9.20 bln rupees as coupon on state bonds

* Outflows

--Nil

End

Reported by Aaryan Khanna

Edited by Deepshikha Bhardwaj

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