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Informist, Thursday, Oct. 3, 2024

MUMBAI – Government bond prices and overnight indexed swap rates may Friday take cues from the overnight movement of US Treasury yields and crude oil futures, dealers said. The domestic market will be sensitive to developments in the broadening conflict in West Asia between Iran and Israel.

The US government's non-farm payrolls data for September is awaited post-market hours Friday, for cues on rate cuts in the US. On the domestic front, the market awaits the outcome of the Reserve Bank of India's Monetary Policy Committee on Wednesday, dealers said. 

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.

BONDS

On Friday, gilts may open steady ahead of the INR 390 billion gilt auction at 1030-1130 IST, dealers said. The government offered to sell INR 390 billion worth of gilts, which includes INR 220 billion of a new 10-year bond. The government will also offer INR 70 billion of 7.02%, 2027 bond and INR 100 billion of 7.46%, 2073 gilt at the same auction.

Developments in the conflict in West Asia would be closely watched, and gilt prices may be sensitive to moves from foreign portfolio investors, dealers said. Traders also await the US non-farm payroll data for September to take cues on cuts in the US. The data is due after market hours on Friday.

Foreign fund inflows are unlikely to reverse substantially because of the inclusion of Indian bonds in JP Morgan's emerging market bond index after the weightage was increased to 4% in September. Any uptick in gilt 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 6.74-6.80% on Friday. On Thursday, the benchmark paper closed at INR 102.24 or 6.78%, the highest yield level since Sept. 17.

OIS RATES

On Friday, swap rates may take cues from the movement in US Treasury yields and crude oil prices. The market will also be sensitive to any developments in the West Asia conflict, dealers said.

Traders await US non-farm payrolls data for September due Friday, for cues on rate cuts in the US. On the domestic front, the market awaits the outcome of the RBI's monetary policy meeting, dealers said. Expectations on monetary policy easing in India are mixed due to the rise in crude oil prices, dealers said. 

The swap rate in the one-year segment is seen at 6.37-6.55% and in the five-year segment at 6.00-6.18%. On Thursday, the one-year swap rate closed at 6.42% and the five-year at 6.08%.

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. On Thursday, the one-day call money rate ended at 5.75%.

RBI AUCTION

--INR 390 billion worth of three gilts

--14-day VRRR tender for INR 1.75 trn

LIQUIDITY

--Total net outflows of INR 246.48 billion. Calculation of flows does not take into account redemption of the standing deposit facility and scheduled variable rate repo and reverse repos.

* Inflows

--INR 10.67 billion as coupon on floating rate bond 2028

--INR 10.00 billion on redemption of four-day reverse repo

--INR 938.15 billion on redemption of three-day reverse repo

--INR 481.20 billion on redemption of overnight reverse repo

* Outflows

--INR 93.00 billion as payment on 91-day T-bills

--INR 75.38 billion as payment on 182-day T-bills

--INR 88.77 billion as payment on 364-day T-bills

--INR 250.02 billion as reversal of 14-day variable rate repo tender 

End

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

Reported by Cassandra Carvalho

Edited by Deepshikha Bhardwaj

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