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Informist, Wednesday, Oct. 9, 2024

MUMBAI – On Thursday, government bonds and overnight indexed swap rates are seen opening steady and may take cues from the movement in US Treasury yields, dealers said. The release of US September Federal Open Market Committee meeting minutes, due at 2330 IST on Wednesday will hold significance as they will offer insights into the thinking of US policymakers on rate cuts after the FOMC's 50-bps rate cut in September.

Market sentiment for gilts is expected to remain positive after the Monetary Policy Committee changed its stance to "neutral" from "withdrawal of accomodation" on Wednesday and on the news of the FTSE Russell adding India's government bonds under the fully accessible route to its Emerging Markets Government Bond index and regional indices from September 2025, dealers said. This inclusion is expected to bring in around $4.5 billion worth of passive flows. 

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

GOVERNMENT BONDS

On Thursday, bonds are seen opening steady after a day of heavy-buying by traders on stance change on Wednesday, dealers said. Prices are likely to take cues from the overnight movement in US Treasury yields and crude oil prices. 

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.

Gilts may also take cues from any further developments in the crisis in West Asia, dealers said. The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.74-6.80% on Thursday. On Wednesday, the benchmark paper closed at INR 102.30 or 6.77%.

OIS RATES

OIS rates may take cues from the movement in US Treasury yields after the release of the US September FOMC meeting minutes, due at 2330 IST, dealers said. The minutes will hold significance as they will offer insights into the thinking of US policymakers on rate cuts after the FOMC's 50-bps rate cut in September.

Traders also look ahead to US September CPI data due on Thursday. The CPI for September is forecast to have risen 0.1% on a monthly basis, after rising 0.2% in August, according to Dow Jones. The core CPI is expected to have risen 0.2% in September, after rising 0.3% in August.
 

Developments in West Asia will also be closely watched, especially their impact on 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 Wednesday, the one-year swap rate closed at 6.40% and the five-year at 6.12%.

CALL

On Thursday, 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 Wednesday, the one-day call money rate ended at 6.24%.

RBI AUCTION

--Nil

LIQUIDITY

--Total net inflows of INR 128.83 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 215.00 billion on 91-day Treasury bills

--INR 90.88 billion on 364-day T-bills

--INR 39.18 billion as coupon on 7.06%, 2028 gilt

--INR 37.24 billion as coupon on 7.06%, 2046 gilt

--INR 19.26 billion as coupon on state government bonds

* Outflows

--INR 134.85 billion as payment on 91-day T-bills

--INR 60.00 billion as payment on 182-day T-bills

--INR 77.89 billion as payment on 364-day T-bills

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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