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Informist, Monday, Oct. 7, 2024

MUMBAI – On Tuesday, government bond prices and overnight indexed swap rates may open steady on caution ahead of the Reserve Bank of India's Monetary Policy Committee meeting outcome due on Wednesday, dealers said.

While there are a few traders who expect the rate setting panel to change its stance from 'withdrawal of accomodation' to 'neutral', the majority are expecting a status quo on the stance and rate, dealers said. 

Any change in US Treasury yields and cruce oil prices may impact both markets, dealers said. Traders will also keep a close watch on any developments in the West Asia conflict. 

On Tuesday, the one-day call money rate may open near the central bank's repo rate of 6.50% because of demand for funds from banks to meet reserve requirements.

BONDS

Gilts are seen opening steady on Tuesday on caution ahead of the RBI's MPC meeting outcome due on Wednesday, dealers said. Gilts may also take cues from any further developments in the crisis in West Asia, along with the movement in crude oil prices, dealers said. Traders may also await the INR 187 billion state-government security auction due at 1030-1130 IST to gauge investor's demand, dealers said. 

On the global front, traders look ahead to FTSE Russell's conclusion of its index review, reportedly due Tuesday. If the index approves the inclusion, a significant movement is not expected as the optimism has already been factored in, dealers said. However, a negative response will also not lead to excessive selling as the inflows from the inclusion will not be significant, they said. 

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 6.81-6.89% on Tuesday. On Monday, the benchmark paper closed at INR 102.72 or 6.85%.

OIS RATES

OIS rates may open steady on Tuesday due to caution ahead of the MPC meeting outcome on Wednesday. Developments in West Asia will also be closely watched, especially their impact on crude 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 Monday, the one-year swap rate closed at 6.50% and the five-year at 6.18%.

CALL

On Tuesday, the one-day call money rate may open near the RBI's repo rate of 6.50% because of demand for funds from banks to meet reserve requirements. 

During the day, the call rate is seen in a range of 6.00-6.60%, dealers said. On Monday, the one-day call money rate ended at 5.75%.

RBI AUCTION

--11 states to raise INR 187 billion through bonds

LIQUIDITY

--Total net inflows of INR 67.5 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 21.17 billion as coupon on 7.27%, 2026 bond
--INR 42.60 billion as coupon on 7.10%, 2034 bond
--INR 3.73 billion as coupon on state government security

* Outflows

--Nil

End

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

Reported by Siddhi Chauhan

Edited by Akul Nishant Akhoury

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