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Informist, Monday, Oct. 28, 2024

MUMBAI – On Tuesday, government bonds and overnight indexed swap rates may take cues from the movement in US Treasury yields and crude oil prices, dealers said. Gilts and swap rates may also take cues from geopolitical developments in West Asia, they said. Trade volumes in money markets may be muted through the week as some traders are on leave during the festival season, with Diwali scheduled on Friday.

Traders await a slew of US data such as the advance Jul-Sept GDP growth numbers, the October employment report and purchasing managers' indices for cues on the Federal Open Market Committee's pace of interest rate cuts. Traders will also watch for any cues on the outcome of the US presidential election next week.

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

GOVERNMENT BONDS

On Tuesday, government bond prices may take cues from the movement in US Treasury yields and crude oil prices, dealers said. Geopolitical developments in West Asia will also be keenly tracked.

At the state bond auction Tuesday, 10 states will raise INR 250.50 billion, lower than the indicated INR 333.45 billion in the calendar for Oct-Dec, but more than triple of last week's figure. The higher borrowing, along with negative sentiment in the market, may cause higher cut-off yields on the bonds, dealers said. 

"I think (at this auction) the spread between state bonds and gilts will widen, by at least 1-2 basis points. Last week, it was a 29 bps spread (between the 10-year benchmark and state bond), it may increase now," a dealer at a state-owned bank said.

The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.84-6.90%, while that on the 6.79%, 2034 bond is seen at 6.80-6.86% on Tuesday. On Monday, the 7.10% 2034 bond closed at INR 101.60, or 6.87% yield, while the 6.79%, 2034 bond closed at INR 99.73 or 6.83%.

OIS RATES

On Tuesday, swap rates are seen taking cues from the movement of US Treasury yields and crude oil prices. Traders may closely watch for further cues on the outcome of the US elections on Nov. 5, dealers said.

On Tuesday, the swap rate in the one-year segment is seen at 6.50-6.65% and in the five-year segment at 6.15-6.40%. On Monday, the one-year swap rate ended at 6.59% and the five-year swap rate closed at 6.32%.

CALL

On Tuesday, the one-day call money rate may open around the RBI's repo rate of 6.50% because of the demand for funds from banks in early trade for reserve requirements. During the day, the call rate is seen in a range of 6.00-6.75%, dealers said. On Monday, the one-day call rate ended at 6.25%.

RBI AUCTION

--10 states to raise INR 250.50 billion via bond sale

LIQUIDITY

--Total net inflows of INR 99.12 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 4.62 billion as coupon on state bonds

--INR 94.50 billion as redemption of state bonds

* Outflows

--Nil

End

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

Reported by Cassandra Carvalho

Edited by Vandana Hingorani

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