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Informist, Thursday, Sep 19, 2024

MUMBAI – Government bond prices may open lower on Friday ahead of the 310-bln-rupee gilts auction. Gilts and swaps may take cues from US unemployment claims data released today by the US Bureau of Labour Statistics. Initial claims for state unemployment benefits for the week ended Saturday fell 12,000 to a four-month low, a seasonally adjusted value of 219,000, weakening the case for further rate cuts in the US, dealers said.

Crucial data points such as the weekly unemployment claims will be monitored closely by the US Federal Reserve to cement its stance on rate cuts for the year ahead, as the US Federal Reserve has shifted its focus from inflation to strengthening the labour market, dealers said. Any sharp movement in US Treasury yields and crude oil prices may also lend cues when the markets open.

On Friday, the three-day call money rate may open near the Reserve Bank of India's repo rate due to demand for funds from banks early in the day to meet their reserve requirements.

BONDS

On Friday, government bond prices may open lower as traders may sell bonds in the secondary market in order to pick up auction stock, dealers said.

Dealers said demand at the auction is seen firm, as the benchmark 10-year gilt will attract investors from across the market. The 7.34%, 2064 gilt up for sale is also a top preference of life insurers and pension funds.

Foreign fund inflows are likely to continue because of the inclusion of Indian bonds in the JP Morgan Index, a 10-month process that started on Jun 28. The subsequent fall in US yields after the Fed's 50 bps cut may increase foreign inflows due to an appealing interest rate differential between the yields of US Treasury notes and Indian gilts.

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 guidelines on liquidity coverage ratio.

The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.74-6.82%. Today, the bond closed at 102.38 rupees, or 6.76% yield.

OIS RATES

Swap rates are seen opening higher after lower-than-expected US weekly unemployment claims. The swap rate in the one-year segment is seen at 6.35-6.53% and in the five-year segment at 5.90-6.10%. Today, the one-year swap rate closed at 6.39% and the five-year at 5.99%.

CALL

On Friday, the three-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. 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 6.60%.

RBI AUCTION

--RBI to conduct a 14-day variable rate repo auction worth 250 bln rupees

LIQUIDITY

--Total net inflows of 109.38 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

--50.42 bln rupees as coupon on 7.59%, 2029 gilt

--36.77 bln rupees as coupon on 7.16%, 2050 gilt

--22.20 bln rupees as coupon on state bonds 

--170.83 bln rupees as redemption on 14-day reverse repo

* Outflows

--826.30 bln rupees as reversal of three-day variable rate repo tender

End

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

Reported by Srijita Bose and Cassandra Carvalho

Edited by Manisha Baxla

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