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Informist, Wednesday, Oct. 23, 2024

MUMBAI – On Thursday, government bonds and overnight indexed swap rates may take cues from the minutes of the Monetary Policy Committee's October meeting, which were released post-market hours. Traders may also take cues from the overnight movement of US Treasury yields and crude oil prices, dealers said.

Comments on growth and inflation in the minutes could lend cues to swap rates and bond prices, dealers said. Traders initially said there did not seem to be much to change India's interest rate view from the commentary, even though new external member Nagesh Kumar had voted for a 25 basis points repo rate cut. Majority of the Reserve Bank of India's rate-setting panel members held status quo on rates in a 5-1 majority, after changing stance to 'neutral' unanimously. In addition, developments in West Asia conflict are being keenly tracked.

"The minutes were well-balanced I'd say, there was an equal mix of both hawkish and dovish comments, with some good data points being mentioned...The commentary was largely along expected lines," a dealer at a private bank said.

Traders also look forward to the release of flash US and India Purchasing Managers' Index prints for October after market hours Thursday.

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.

GOVERNMENT BONDS

On Thursday, gilts may take cues from the movement of US yields and crude oil prices when the market opens, dealers said. Takeaways from the minutes of the MPC meeting of Oct. 7-9 could lend cues to gilt prices.

RBI Executive Director Rajiv Ranjan said in his minutes that monetary policy had worked well to contain inflation, showing the MPC was on the right track to change the policy stance to neutral. The minutes showed that two of the three new external members, Ram Singh and Saugata Bhattacharya, said CPI inflation was a concern in the near term. Nagesh Kumar, who had voted for a 25 bps rate cut, said monetary policy tightening had anchored inflation expectations adequately, and was concerned about growth.

The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.79-6.86%, while that on the 6.79%, 2034 bond is seen at 6.74-6.82% on Thursday. On Wednesday, the 10-year benchmark 7.10%, 2034 bond closed at INR 101.93, or 6.82% yield, and the new 10-year 6.79%, 2034 bond ended at INR 100.14, or 6.77% yield.

OIS RATES

On Thursday, OIS rates are seen taking cues from the movement of US Treasury yields and crude oil prices, dealers said. Domestic traders may continue to receive fixed rates after OIS rates failed to break crucial levels earlier in the week. The swap rate in the one-year segment is seen at 6.45-6.62% and in the five-year segment at 6.12-6.30%. On Wednesday, the one-year swap rate closed at 6.53% and the five-year swap closed at 6.23%. 

CALL

On Thursday, the one-day call money rate may open around the RBI's repo rate of 6.50% because of demand for funds from banks early in the trade for 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 rate ended at 6.70%.

RBI AUCTION

--Nil

LIQUIDITY

--Total net outflows of INR 158.89 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 140.00 billion on 91-day Treasury bills

--INR 78.72 billion on 182-day Treasury bills

--INR 96.75 billion on 364-day Treasury bills

--INR 5.55 billion as coupon on state bonds

* Outflows

--INR 331.50 billion as payment on 91-day T-bills

--INR 85.00 billion as payment on 182-day T-bills

--INR 63.41 billion as payment on 364-day T-bills

End

Reported by Cassandra Carvalho

Edited by Ashish Shirke

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