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Informist, Tuesday, Sep 10, 2024

MUMBAI – Prices of government bonds and rates on overnight indexed swaps are seen opening steady on Wednesday ahead of the US CPI inflation for August due later in the day and India CPI data for the previous month on Thursday, dealers said. Both the readings will be published post-market hours. These are likely to provide interest rate cues for both the economies, with traders having high expectations of imminent rate cuts, dealers said.

The headline consumer price index in the US is expected to rise 0.2% on month in August, unchanged from the month before, according to a poll by Reuters. On a yearly basis, inflation is expected to have risen 2.6% last month, down from a 2.9% increase in July.

India's CPI print for August is seen at 3.6%, the second consecutive month it would have stayed below the Reserve Bank of India's target of 4.0%, according to an Informist poll. Any sharp movement in US Treasury yields and crude oil prices may also lend cues when the market opens.

On Wednesday, the one-day call money rate may open near the RBI's repo rate due to demand for funds from banks early in the day to meet their reserve requirements.

GOVERNMENT BONDS

On Wednesday, gilt prices may open steady due to caution ahead of the US CPI data, dealers said. Traders are also waiting for India CPI data on Thursday.  

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 6.83-6.87% during the day. Today, the bond closed at 101.72 rupees, or 6.85% yield.

OIS RATES

On Wednesday, swap rates are seen opening steady as traders await inflation data for August in India and the US this week.

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 6.44% and the five-year at 6.05%.

CALL

On Wednesday, the one-day call money rate may open near the RBI's repo rate due to demand for funds from banks in early trade to meet their reserve requirements. 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 6.40%.

RBI AUCTION

--RBI to auction 80 bln rupees of 91-day T-bills

--RBI to auction 60 bln rupees of 182-day T-bills

--RBI to auction 60 bln rupees of 364-day T-bills

--RBI to conduct a two-day variable rate reverse repo auction worth 1 trln rupees

LIQUIDITY

--Total net outflows of 110.78 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

--7.64 bln rupees as coupon on 10.18%, 2026 gilt 

--19.48 bln rupees as coupon on state bonds 

* Outflows

--137.90 bln rupees as payment for state bonds

End

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

Reported by Cassandra Carvalho

Edited by Ashish Shirke

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