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Informist, Monday, Nov. 4, 2024

NEW DELHI – Government bond prices and overnight indexed swap rates may open steady Tuesday on caution ahead of the US presidential election, with counting of votes set to begin early Wednesday India time. Any hints to the outcome of the closely contested election, including early voting patterns, may lend cues to the markets, dealers said.

Both candidates--Republican Donald Trump and Democrat Kamala Harris--are neck and neck on the eve of the election. The odds of a Trump victory rose last week but have cooled since to show a relatively even race. Harris had drawn ahead in key swing states just before the voting, though within the margin of error, according to the latest poll conducted by The New York Times.

Gilts and swap rates may also take cues from movement in US Treasury yields and crude oil prices. The markets are reliant on offshore cues due to a lack of domestic triggers on interest rates, dealers said.

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, prices of government bonds may open steady on caution ahead of the US elections. Until there is some clarity on the likely outcome of the US presidential election, traders are not expected to pick up gilts in sizeable quantities, dealers said. Focus will also turn to the US Federal Open Market Committee rate decision later this week.

The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.78-6.88%, while that on the 6.79%, 2034 bond is seen at 6.76-6.84% Tuesday. On Monday, the 7.10%, 2034 bond closed at INR 101.84, or 6.83% yield, and the 6.79%, 2034 bond ended at INR 99.94, or 6.80% yield.

OIS RATES

On Tuesday, caution before the US presidential election may prevent volatility in OIS rates. Offshore traders are also expected to remain on the sidelines, dealers said.

The swap rate in the one-year segment is seen at 6.52-6.57% and in the five-year segment at 6.20-6.33%. On Monday, the one-year swap rate closed at 6.54% and the five-year swap closed at 6.29%. 

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 5.75%.

RBI AUCTION

--Eight states to raise INR 94.67 billion via bond sale Tuesday

LIQUIDITY

--Total net inflows of INR 8.72 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 8.72 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 Aaryan Khanna

Edited by Rajeev Pai

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