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Informist, Wednesday, Aug 21, 2024

MUMBAI – Government bond prices and overnight indexed swap rates may take cues from the revision to US labour data until March and the minutes of the US Federal Open Market Committee's latest meeting, dealers said.

Comments from the minutes of India's August Monetary Policy Committee meeting on Thursday, as well as US Federal Reserve Chair Jerome Powell at the Jackson Hole Economic Symposium on Friday, are also watched for interest rate cues. Any sharp movement in US Treasury yields and crude oil prices may also lend cues to gilts and swaps at the opening.

On Thursday, the one-day call money rate may open above the repo rate of 6.50% due to demand for funds from banks after today's outflow for goods and services tax.

GOVERNMENT BONDS

On Thursday, gilts may take cues from the revision to US labour data until March and the minutes of the FOMC's latest meeting, dealers said. Comments from the minutes of India's August MPC meeting as well as US Fed Chair Jerome Powell at the Jackson Hole Economic Symposium on Friday are also watched for interest rate cues.

The appetite for domestic bonds is likely to remain strong due to a steady stream of foreign fund inflows owing 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 6.82-6.90% during the day. Today, the bond closed at 101.68 rupees, or 6.86% yield.

OIS RATES

Swap rates may take cues from the minutes of the US Federal Open Market Committee's July meeting, scheduled at 2330 IST, dealers said. The revision of US labour data until March this year may also be a trigger for the rate outlook in the world's largest economy.

Traders may remain cautious ahead of the Jackson Hole Economic symposium in the US that starts Thursday, with US Fed Chair Jerome Powell scheduled to speak on Friday. The minutes of India's MPC meet earlier this month are due after market hours Thursday, and may also lend cues on interest rates, 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%. Today, the one-year swap rate closed at 6.53% and the five-year at 6.11%.

CALL

On Thursday, the one-day call money rate may open above the repo rate of 6.50% due to demand for funds from banks after today's GST outflow. During the day, the call rate is seen in a range of 6.20-6.60%, dealers said. Today, the one-day call money rate ended at 6.24%.

LIQUIDITY

--Total net inflows of 20.9 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

--160.00 bln rupees as redemption of 182-day T-bills

--69.84 bln rupees as redemption of 364-day T-bills

--53.72 bln rupees as coupon on 7.17%, 2028 gilt

--50.37 bln rupees as coupon on floating rate bond 2035

--7.16 bln rupees as coupon on state bonds

* Outflows

--170.00 bln rupees as payment for 91-day T-bills

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

--80.19 bln rupees as payment for 364-day T-bills

End

Reported by Kshipra Petkar

Edited by Manisha Baxla

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