India Money Market Outlook
Gilts seen steady Fri ahead of debt sale
This story was originally published at 22:53 IST on 29 August 2024
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MUMBAI - Government bond prices may open steady on Friday ahead of the 300-bln-rupee weekly gilt auction at 1030-1130 IST, dealers said. The government will sell the 7.10%, 2034 bond worth 200 bln rupees and 7.09%, 2054 gilt worth 100 bln rupees at auction.
On Friday, swap rates may open steady as the US growth and labour market data released after market hours today was in line with expectations. Any sharp movement in US Treasury yields and crude oil prices may also lend cues to gilts and swaps at the opening.
In the June quarter, the US GDP grew 3.0% against a forecast of 2.8% compiled by Dow Jones. Meanwhile, initial unemployment claims for the week ended Saturday were 231,000, against a consensus market expectation of 230,000. The figure was largely unchanged from the previous week as well.
India's GDP numbers on Friday may hold significance if they surprise on the downside, making the case for quicker rate cuts, dealers said. Reserve Bank of India officials on the Monetary Policy Committee, including Governor Shaktikanta Das, have so far shied away from terming growth anything other than strong. The US Federal Reserve's preferred inflation gauge – the core personal consumption expenditures price index – for July is also due after market hours.
On Friday, the three-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 Friday, gilt prices may open steady ahead of the 300-bln-rupee weekly gilt auction at 1030-1130 IST, dealers said. US growth and labour market data released after market hours today was on expected lines, and did not move the needle on US rate cut expectations.
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.
The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.83-6.89% during the day. Today, the bond closed at 101.63 rupees, or 6.86% yield.
OIS RATES
On Friday, swap rates may open steady as the US growth and labour market data released after market hours today was on expected lines. Traders look ahead of India's GDP data and US inflation for the next trigger on interest rates, dealers said.
The swap rate in the one-year segment is seen at 6.43-6.58% and in the five-year segment at 6.00-6.18%. Today, the one-year swap rate closed at 6.49% and the five-year at 6.07%.
CALL
On Friday, the three-day call money rate may open near the RBI's repo rate of 6.50% due to strong demand for funds from banks during early trading hours. During the day, the call rate is seen at 6.20-6.75%, dealers said. Today, the one-day call money rate ended at 6.70%.
RBI AUCTION
--Govt to auction two gilts worth 300 bln rupees
--RBI to conduct a 7-day variable rate reverse repo auction worth 1 trln rupees
LIQUIDITY
--There are no scheduled net flows due on Friday. Calculation of flows does not take into account redemption of the standing deposit facility and scheduled variable rate repo and reverse repos.
* Inflows
--290.80 bln rupees as redemption of 4-day reverse repo
--98.75 bln rupees as redemption of 2-day reverse repo
* Outflows
--Nil
End
Reported by Srijita Bose
Edited by Deepshikha Bhardwaj
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