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Informist, Monday, Aug 26, 2024

MUMBAI – Government bond prices and overnight indexed swap rates are seen opening steady on Tuesday due to a lack of fresh cues on interest rates, dealers said.

Long-term gilts may be out of favour as traders stock up on state bonds at the largest auction of these bonds for 2024-25 (Apr-Mar) so far. Fourteen states are looking to raise 362.50 bln rupees, against 294 bln rupees seen this week in the indicative calendar for Jul-Sep. Any sharp movement in US Treasury yields and crude oil prices may also lend cues at the opening.

On Tuesday, the one-day call money rate may open near the RBI's repo rate of 6.50% due to strong demand for funds from banks amid early trading hours.

GOVERNMENT BONDS

On Tuesday, gilt prices may open steady after a series of cues on interest rates in the past week failed to lend direction on the rate trajectory in India, dealers said. Demand for long-term bonds may be limited as states are scheduled to raise 362.50 bln rupees through bonds on Tuesday, the largest such sale since March.

Foreign fund inflows are likely to continue 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.

Any sharp movement in US Treasury yields and crude oil prices may also lend cues at the opening. 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 101.72 rupees, or 6.85% yield, the lowest since Mar 31, 2022.

OIS RATES

On Tuesday, swap rates may open steady due to lack of 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 6.43-6.58% and in the five-year segment at 5.95-6.18%.

Today, the one-year swap rate settled at 6.48%, the lowest in nearly two years, and the five-year swap ended at 6.05%, the lowest since Jun 6, 2023.

CALL

On Tuesday, the one-day call money rate may open near the RBI's repo rate of 6.50% due to demand for funds from banks in early trade. During the day, the call rate is seen at 6.20-6.80%, dealers said. Today, the one-day call rate ended at 5.75%.

RBI AUCTION

--14 states to raise 362.50 bln rupees via bond sale

LIQUIDITY

--Total net inflows of 72.04 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

--10.24 bln rupees as coupon on state bonds

--61.80 bln rupees as redemption of state bonds

* Outflows

--Nil

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Cassandra Carvalho

Edited by Akul Nishant Akhoury

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