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Informist, Monday, Oct. 21, 2024

MUMBAI - On Tuesday, government bonds and overnight indexed swap rates may take cues from the movement of US yields and crude oil prices, dealers said. 

The result of the INR 81-billion state bond auction may also lend direction to gilt prices. The lower-than-indicated borrowing through state bonds could result in a higher demand at the auction. The developments in the conflict in West Asia will be keenly tracked by both gilts and swaps markets. 

On Tuesday, the one-day call money rate may open around the Reserve Bank of India's repo rate of 6.50% because of demand for funds from banks in early trade for reserve requirements.

GOVERNMENT BONDS

On Tuesday, gilts may take cues from the movement of US yields and crude oil prices at the open, dealers said. The result of the INR 81-billion state bond auction may also lend direction.

The indicative calendar for state borrowing showed a borrowing of INR 296 billion this week. The Centre devolved double the typical amount to states in October, which is why they borrowed less, dealers said. This may aid appetite for bonds maturing in 10-20 years, they said.

Gilts under the fully accessible route may see passive inflows from foreign investors due to their ongoing inclusion in J.P. Morgan's emerging market bond index since June, while active foreign portfolio investors may exit holdings in gilts due to a continued rise in US yields. 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 6.79-6.86% on Tuesday, while the 6.79%, 2034 bond is seen at 6.74-6.82%. On Monday, the 10-year benchmark, 7.10%, 2034 bond closed at INR 101.86, or 6.83% yield, and the new 10-year 6.79%, 2034 bond ended at INR 100.08, or 6.77% yield.

OIS RATES

On Tuesday, OIS rates are seen taking cues from the movement of US Treasury yields and crude oil prices. Swap rates may not rise much further after hitting multi-month highs, dealers said.

The swap rate in the one-year segment is seen at 6.40-6.55% and in the five-year segment at 6.05-6.25%. On Monday, the one-year swap rate closed at 6.54% and the five-year swap closed at 6.25%. 

CALL

On Tuesday, the one-day call money rate may open around the RBI's repo rate of 6.50% because of demand for funds from banks in early trade for 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 rate ended at 5.75%.

RBI AUCTION

--5 states to raise INR 81 bln via bond sale on Tuesday

LIQUIDITY

--Total net inflows of INR 43.11 billion. Calculation of flows does not take into account redemption of the standing deposit facility and scheduled variable rate repo and reverse repo.

* Inflows

--INR 33.03 billion as coupon on 7.34%, 2064 bonds

--INR 10.08 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 Manisha Baxla

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