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Informist, Monday, Sep 2, 2024

MUMBAI – Government bond prices and overnight indexed swap rates may open steady on Tuesday ahead of key US economic data scheduled for release this week, given the lack of domestic cues, dealers said.

US Manufacturing Purchasing Managers' Index data will be released on Tuesday at 1915 IST and US non-farm payrolls data will be released on Friday at 1800 IST. Any sharp movement in US Treasury yields and crude oil prices overnight will affect gilt prices and swap rates at the opening.

On Tuesday, the one-day call money rate may open around the Reserve Bank of India's repo rate of 6.50% because of demand for funds from banks in early trading hours.

GOVERNMENT BONDS

On Tuesday, gilt prices may open steady ahead of key economic data in the US later this week, amid lack of domestic cues. The US rate trajectory is closely watched as it may lend direction to domestic interest rates as well, dealers said.

The US Fed's preferred inflation gauge--the core personal consumption expenditures price index--rose 0.2% on month in July, in line with market expectations, and did not have a sizeable impact on the US rate view, dealers said. 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 6.83-6.89% during the day. Today, the bond closed at 101.55 rupees, or 6.88% yield.

OIS RATES

OIS rates are seen steady on Tuesday ahead of key US economic data later this week, dealers said. Purchasing Managers' Index data is due at 1915 IST on Tuesday, while US non-farm payrolls data for August is due after Indian market hours on Friday.

Significant cues to the US rate trajectory are seen guiding domestic interest rate expectations as well, 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 6.51% and the five-year at 6.12%.

CALL

On Tuesday, the one-day call money rate may open around the RBI's repo rate of 6.50% because of demand for funds from banks in early trading hours. During the day, the call rate is seen in a range of 6.00-6.60%, dealers said. Today, the one-day call money rate ended at 5.75%.

RBI AUCTION

--11 states to raise 205.53 bln rupees via bond sale

--3-day variable rate reverse repo auction worth 1 trln rupees

LIQUIDITY

--Total net inflows of 11.88 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

--11.88 bln rupees as coupon on state bonds

* Outflows

--Nil

End

Reported by Cassandra Carvalho

Edited by Avishek Dutta

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