More Stories

Informist, Tuesday, Oct. 8, 2024

MUMBAI – Government bonds and overnight indexed swap rates are seen opening steady on Wednesday ahead of Reserve Bank of India Governor Shaktikanta Das' statement detailing the outcome of the Monetary Policy Committee's rate decision, dealers said. Das' statement is scheduled to begin 1000 IST.

Some traders expect the rate setting panel to change its stance from 'withdrawal of accomodation' to 'neutral', while others expect a status quo on the stance and rate front, dealers said. The government last week appointed Director of the Delhi School of Economics Ram Singh, economist Saugata Bhattacharya, and Chief Executive and Director of the Institute for Studies in Industrial Development Nagesh Kumar to the MPC.

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. 

The minutes of the US Federal Open Market Committee's September meeting may lead to caution in markets in the latter half of the day, with the release due at 2330 IST on Wednesday. The minutes will hold significance as they will offer insights into the thinking of US policymakers on rate cuts, after the FOMC's 50-basis-point rate cut in September, dealers said.

On Wednesday, 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.

GOVERNMENT BONDS

Gilts are seen opening steady on Wednesday ahead of the RBI's MPC meeting outcome, dealers said. While some traders expect the rate setting panel to change its stance from 'withdrawal of accomodation' to 'neutral', others expect status quo on the stance and rate front, dealers said.

Some dealers also said that the market will open higher, as there are no negative cues from the RBI regarding the onset of rate cuts. "The risk is relatively less, there's only positive signs (about policy easing in India), and already the market has seen a 10 basis point correction recently," a dealer at a state-owned bank said. 

Traders await FTSE Russell's conclusion of its index review, reportedly due on Tuesday. If the index approves India's inclusion to its emerging market bond index, the demand outlook for Indian gilts will improve, and is likely to drive prices higher, dealers said. On the other hand, a further delay in the inclusion –- India has been on the watchlist for entry since 2021 --will also not lead to excessive selling as the inflows from the inclusion are not expected to be significant, they said. 

The gilts market may see foreign fund inflows because of the inclusion of Indian bonds in J.P. 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 6.72-6.86% on Wednesday, a wide range due to the uncertainty of the MPC outcome. On Tuesday, the benchmark paper closed at INR 102.02 or 6.81%.

OIS RATES

OIS rates may open steady on Wednesday on caution ahead of Das' statement on monetary policy. Traders remain divided on the likelihood of the rate setting panel changing its stance to neutral from 'withdrawal of accommodation', 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 Tuesday, the one-year swap rate closed at 6.46% and the five-year at 6.14%.

CALL

On Wednesday, 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 Tuesday, the one-day call money rate ended at 6.40%.

RBI AUCTION

--RBI to auction 91-day T-bills worth INR 70 bln

--RBI to auction 182-day T-bills worth INR 60 bln

--RBI to auction 364-day T-bills worth INR 60 bln

LIQUIDITY

--Total net outflows of INR 165.80 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 16.20 billion as coupon on state government bonds

--INR 5.00 billion as redemption on state bonds

* Outflows

--INR 187.00 billion as payment on state bonds

End

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

Reported by Srijita Bose

Edited by Akul Nishant Akhoury

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.