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Informist, Friday, Oct. 11, 2024

MUMBAI – On Monday, government bonds and overnight indexed swap rates may take cues from movement in US Treasury yields and prices of crude oil, dealers said. Gilt traders will most likely remain cautious ahead of India CPI data for September, due for release at 1730 IST, dealers said. 

Reserve Bank of India Governor Shaktikanta Das Wednesday highlighted that the near-term risks to inflation remain higher, and the possibility of a higher print in September due to an adverse base effect. Traders will keep a keen watch on the print, and bond prices may rise if the reading is below 5%. Dealers said the October CPI print will also be important in lending cues for a potential December rate cut by the Monetary Policy Committee. Bond prices may be volatile if India's inflation in September is outside the 4.8-5.2% band.

On Monday, 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 not traded on Saturday. On Monday, bonds are seen opening steady ahead of India CPI data for September, due for release at 1730 IST, dealers said. Gilts may also take cues from any movement in US Treasury yields and prices of crude oil.

The gilt 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.

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 6.74-6.83% on Monday. On Friday, the 10-year 7.10%, 2034 gilt closed at INR 102.13 or 6.79% yield.

OIS RATES

Swaps are not traded on Saturday. OIS rates may take cues on Monday from the movement in US Treasury yields and crude oil prices, dealers said.

The developments in West Asia are also likely to lend cues. The swap rate in the one-year segment is seen at 6.35-6.55% and in the five-year segment at 6.10-6.25% on Monday. On Friday, the one-year swap rates ended at 6.44% and the five-year swap rates closed at 6.17%. 

CALL

Money market is shut on Saturday. On Monday, 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 Friday, the three-day call closed at 6.85%.

RBI AUCTION

--Nil

LIQUIDITY

--Total net outflows of INR 198.88 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 41.51 billion as coupon on 5.63%, 2026 bond on Saturday

--INR 8.79 billion as coupon on state government bonds on Saturday

--INR 15.75 billion as coupon on state government bonds on Sunday

--INR 5.07 billion as coupon on state government bonds on Monday

--INR 20.00 billion redemption on state government bonds on Monday

--INR 452.60 billion as redemption on 3-day variable rate reverse repo on Monday

* Outflows

--INR 290.00 billion as payment of gilts on Monday

End

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

Reported by Srijita Bose

Edited by Akul Nishant Akhoury

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