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Informist, Saturday, Sep 21, 2024

MUMBAI – Government bond prices and overnight indexed swap rates may open steady Monday on lack of domestic and global cues, dealers said. Any sharp movement in US Treasury yields and crude oil prices may also lend cues at opening.

The one-day call money rate may open above the RBI's repo rate of 6.50% due to firm demand from banks amid tight liquidity conditions. 

GOVERNMENT BONDS

On Monday, government bond prices may open steady. Demand for bonds maturing in over 10 years may take a hit ahead of the monthly gilt switch auction, dealers said. The government will switch eight short-term gilts worth 300 bln rupees with four bonds at 1030-1130 IST.

Foreign fund inflows are likely to continue because of the inclusion of Indian bonds in JP Morgan's emerging market bond index. The subsequent fall in US yields after the Federal Open Market Committee's 50-basis-point cut may increase foreign inflows due to an appealing interest rate differential between the yields of US Treasury notes and Indian gilts.

The movement in crude oil prices may also affect gilt prices. 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%. On Friday, the 10-year benchmark ended at 102.34 rupees or 6.76% yield.

OIS RATES

OIS rates may open steady on Monday due to a lack of firm domestic and global cues, dealers said. 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%. On Friday, the one-year swap rate ended at 6.39%, while the five-year swap rate ended at 6.01%.

CALL

On Monday, the one-day call money rate may open above the RBI's repo rate of 6.50% due to firm demand from banks amid tight liquidity conditions.

During the day, the call rate is seen in a range of 6.20-6.75%, dealers said. Today, the two-day call rate ended at 6.40%. 

RBI AUCTION

--Government to switch eight gilts worth 300 bln rupees with four gilts via auction.

LIQUIDITY

--Total net outflows of 219.48 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

--34.75 bln rupees as coupon floating rate bond

--14.62 bln rupees as coupon on state bonds

--31.15 bln rupees as coupon on state bonds
--10.00 bln rupees as redemption on state bonds

* Outflows

--310.00 bln rupees as payment for gilts

End

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

Reported by Siddhi Chauhan

Edited by Aditya Sakorkar

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