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Informist, Thursday, Oct. 31, 2024

MUMBAI – On Monday, government bonds and overnight indexed swap rates may take cues from the movement in US Treasury yields after the release of US personal consumption expenditures price index post market-hours and non-farm payrolls data due Friday, dealers said. Money markets are shut on Friday for Diwali, and gilts and OIS rates are not traded on Saturday.

US personal consumption expenditure in September rose 0.2% on month and 2.1% on year. The US Federal Reserve's preferred inflation gauge was in line with Dow Jones' estimates. Meanwhile, US initial unemployment claims for the week ended Saturday were lower than expected.

The US October employment report on Friday will be the next trigger to be watched for direction on US interest rates ahead of the Federal Open Market Committee's decision on Nov. 7.

Further insight on the outcome of the US presidential elections on Tuesday will also be eyed, dealers said. The movement in crude oil prices, and developments in the West Asia conflict, may also lend cues. 

On Monday, 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 Monday, prices of government bonds may take cues from the movement in US Treasury yields after several key data points are released over the long weekend for domestic traders, dealers said.

The 7.10%, 2034 bond's yield may top 6.85% if incoming US data make the case for a slower pace of rate cuts, after climbing past that level earlier this week, dealers said. Until the US presidential election on Tuesday, traders are not expected to pick up gilts in sizeable quantities, and will look at any indication of the election result for cues, dealers said.

The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.78-6.90%, while that on the 6.79%, 2034 bond is seen at 6.79-6.84% on Monday. On Thursday, 7.10%, 2034 bond closed at INR 101.73, or 6.85% yield, and the 6.79%, 2034 bond ended at INR 99.84, or 6.81% yield.

OIS RATES

On Monday, the movement of US Treasury yields after a slew of economic data due this week may lend cues to overnight indexed swap rates. The swap rate in the one-year segment is seen at 6.45-6.65% and in the five-year segment at 6.15-6.40%. On Thursday, the one-year swap rate closed at 6.55% and the five-year swap closed at 6.30%. 

CALL

On Monday, 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 6.00-6.75%, dealers said. On Thursday, the four-day call rate ended at 5.75%.

RBI AUCTION

--Nil

LIQUIDITY

--Total net inflows of INR 908.54 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 85.00 billion on 182-day Treasury bills on Friday

--INR 7.05 billion as coupon on state bonds on Friday

--INR 6.16 billion as coupon on state bonds on Saturday

--INR 7.87 billion as coupon on state bonds on Sunday

--INR 774.13 billion as redemption of 6.18%, 2024 gilt on Monday

--INR 4.42 billion as coupon on state bonds on Monday

--INR 23.92 billion as coupon on 6.18%, 2024 gilt on Monday

* Outflows

--Nil

End

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

Reported by Cassandra Carvalho

Edited by Tanima Banerjee

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