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Informist, Friday, Sep 27, 2024

MUMBAI – On Monday, gilts may open steady due to mixed cues, while overnight indexed swap rates may take cues from the movement in US Treasury yields and crude oil prices, dealers said. 

The market may also take cues from US personal consumption expenditure data, released post-market hours today. The index rose 2.2% on year in August, against 2.3% rise expected by Dow Jones, and down from 2.5% in July. The core personal consumption expenditure index rose 2.7% on year in August, in line with expectations.

On Monday, the one-day call money rate may open near the Reserve Bank of India's repo rate due to demand for funds from banks in early trade to meet their reserve requirements. Interbank borrowing rates are also seen higher on Monday as banks will avoid lending funds at the quarter-end.

BONDS

Gilts are not traded on Saturday. On Monday, gilts may open steady due to mixed cues, dealers said.

The indicative calendar of state borrowing for Oct-Dec released post market hours today was higher than traders' expectations. States will borrow 3.2 trln rupees for the quarter, while traders expecteded a number between 2.8-3.1 trln rupees. The figure might weigh on gilt prices, particularly those of long-term gilts, dealers said.

However, the market has somewhat discounted a larger calendar, which is likely to balloon further in Jan-Mar. Moreover, states have borrowed only 75% of the indicated amount overall in Apr-Sep, and maintaining that would keep supply at similar levels to Jul-Sep, which would be a positive, dealers said.

Heavy selling of bonds today would leave traders with space for more gilts on their trading books. Since today was the last day to add value to banks' balance sheets for Jul-Sep, selling bonds at a profit is seen to reduce on Monday, dealers said.

Foreign fund inflows are likely to continue because of the inclusion of Indian bonds in J.P. Morgan's emerging market bond index. The subsequent fall in US yields after the Fed'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 overnight movement in crude oil prices may also affect gilt prices at the open. 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 6.73-6.79% on Monday. Today, the benchmark paper closed at 102.35 rupees, or 6.76% yield.

OIS RATES

Swap markets are shut on Saturday. OIS rates may take cues from the movement in US Treasury yields and crude oil prices on Monday, 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%. Today, the one-year swap rate closed at 6.38% and the five-year at 6.03%.

CALL

Money markets are shut on Saturday. On Monday, 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. Interbank borrowing rates are also seen higher Monday as banks will avoid lending funds at quarter-end.

During the day, the call rate is seen in a range of 6.20-6.70%, dealers said. Today, the three-day call money rate ended at 6.50%.

RBI AUCTION

--RBI to conduct an auction of 4-day variable rate reverse repo on Monday

LIQUIDITY

--Total net outflows of 217.45 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

--12.16 bln rupees as coupon on state bonds on Saturday

--26.83 bln rupees as coupon on state bonds on Sunday

--30.16 bln rupees as coupon 9.20%, 2030 bond on Monday

--20.00 bln rupees as redemption on state bonds on Monday

--33.40 bln rupees as coupon on state bonds on Monday

* Outflows

--340.00 bln rupees as payment of gilts on Monday

End

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

Reported by Srijita Bose

Edited by Tanima Banerjee

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