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Informist, Friday, Oct. 4, 2024

MUMBAI – On Saturday, the two-day call money rate may open below the Reserve Bank of India's repo rate of 6.50% because of low demand for funds from banks amid the liquidity surplus. As is usually the case on Saturdays, volume in the market is expected to be low.

During the day, the call rate is seen in a range of 6.00-6.60%, dealers said. On Friday, the three-day call money rate ended at 6.25%.

Government bonds and overnight indexed swaps rates are not traded on Saturdays. On Monday, a rise in US Treasury yields may weigh on gilts and push up swap rates, following the US September employment report released post market hours today, dealers said. Traders may also take cues from the movement in crude oil prices. The developments in the West Asia region will also be closely watched, dealers said.

Data released by the Bureau of Labor Statistics showed that the non-farm payrolls data print rose higher-than-expected, with a rise of 254,000, against estimates of 150,000. After the data was released, the yield on the US Treasury rose to 3.96% from 3.86% at 1700 IST Friday. With the slower-than-expectation cooling in the labour market, the Federal Open Market Committee could opt for a smaller quantum of rate cuts, of 25 basis points. The CME Group's FedWatch shows the likelihood of a modest 25 basis point rate cut at 94.5% after the data, with only a small minority seeing a 50-bps rate cut. 

GOVERNMENT BONDS

The gilt market is shut on Saturday. On Monday, a rise in US Treasury yields may weigh on gilt prices, following the US September employment report released after market hours today, dealers said. If the yield of the benchmark 10-year gilt reaches 6.85%, dealers expect traders to pick up bonds as it is seen as lucrative.

The gilts market may see foreign fund inflows 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 6.76-6.86% on Monday. On Friday, the benchmark paper closed at INR 101.84 or 6.8339% yield.

OIS RATES

Swaps are not traded on Saturday. On Monday, a rise in US Treasury yields may push up OIS rates, following the US September employment report released post market hours today, dealers said.

On the domestic front, the market awaits the outcome of the RBI's monetary policy meeting on Wednesday. Expectations of 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 6.40-6.58% and in the five-year segment at 6.10-6.25%. On Friday, the one-year swap rate closed at 6.45% and the five-year at 6.14%.

RBI AUCTION

--Nil

LIQUIDITY

--Total net inflows of INR 8.68 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 8.68 billion as coupon on state bonds

* Outflows

--Nil

End

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

Reported by Srijita Bose

Edited by Deepshikha Bhardwaj

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