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Informist, Thursday, Sep 5, 2024

MUMBAI – Government bond prices may open steady on Friday ahead of the 290-bln-rupee weekly gilt auction, dealers said. The government will sell 60 bln of the 7.02%, 2027 gilt, 120 bln rupees of the 7.23%, 2039 bond, and 110 bln of 7.34%, 2064 bond at 1030-1130 IST on Friday.

Overnight indexed swap rates are seen opening steady due to caution ahead of US non-farm payrolls data for August, seen as a key trigger for the US Federal Open Market Committee's rate decision later this month.

After market hours today, ADP data showed the number of US private jobs rose by 99,000 in August, below expectations of 145,000. However, initial jobless claims in the US for the week ended Saturday were at 227,000, lower than the previous week and below the market consensus. 

A string of weak jobs data recently has raised expectations of a 50-basis point rate cut in the US later this month. With the mixed data, fresh bets on rate cuts are unlikely until August's non-farm payroll data is out, dealers said. Any sharp movement in US Treasury yields and crude oil prices may also lend cues at the opening.

On Friday, the three-day call money rate may open above 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 Friday, gilt prices may open steady ahead of the 290-bln-rupee weekly gilt auction, dealers said. Demand at the auction is expected to be robust.

Foreign banks are expected to pick up the three-year bond at the auction, along with state-owned banks. Mutual funds, pension funds and life insurers may pick up the 15-year and 40-year bond at the auction, dealers said. Traders may be cautious ahead of US non-farm payrolls data for August, seen as a key trigger on the US FOMC's rate decision later this month.

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 101.69 rupees, or 6.86% yield.

OIS RATES

OIS rates are seen opening steady on Friday due to caution ahead of US non-farm payrolls data for August, seen as a key trigger for the FOMC's rate decision later this month.

The swap rate in the one-year segment is seen at 6.43-6.53% and in the five-year segment at 6.00-6.12%. Today, the one-year swap rate closed at 6.46% and the five-year at 6.06%.

CALL

On Friday, the three-day call money rate may open above 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 6.00-6.65%, dealers said. Today, the one-day call money rate ended at 6.24%.

RBI AUCTION

--Govt to auction three gilts worth 290 bln rupees

LIQUIDITY

--Total net inflows of 53.06 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

--31.28 bln rupees as coupon on 6.97%, 2026 gilt

--21.78 bln rupees as coupon on state bonds

--203.77 bln rupees as redemption of 14-day variable rate reverse repo

--40.00 bln rupees as redemption of 7-day variable rate reverse repo

--389.65 bln rupees as redemption of 4-day variable rate reverse repo

--439.55 bln rupees as redemption of 3-day variable rate reverse repo

--576.60 bln rupees as redemption of 2-day variable rate reverse repo

--405.30 bln rupees as redemption of 1-day variable rate reverse repo

* Outflows

--Nil

End

Reported by Srijita Bose

Edited by Avishek Dutta

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