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Informist, Thursday, Nov. 7, 2024

MUMBAI – Government bonds and overnight indexed swap rates will Friday take cues from the movement in US Treasury yields after the US Federal Open Market Committee meeting outcome at 0030 IST, dealers said.

The panel is widely expected to cut interest rates by 25 bps, but commentary from US Federal Reserve Chair Jerome Powell may lend cues. In addition, traders may also track the movement in crude oil prices and any developments on the conflict in West Asia, dealers said. 

Friday, the three-day call money rate may open near the RBI's repo rate of 6.50% because of demand for funds from banks to meet the reserve requirements.

GOVERNMENT BONDS

Friday, prices of government bonds will take cues from the movement of US Treasury yields after the FOMC outcome at 0030 IST, dealers said. Traders may avoid large bets before the weekly gilt auction at 1030-1130 IST.

Appetite for gilts at the auction will be closely eyed, after bond prices have had little reaction to Donald Trump's win in the US presidential election. His policies are expected to be negative for gilt prices, as they could push up US Treasury yields, dealers said. The government will sell INR 70 billion of 7.02%, 2027 bond and INR 150 billion of 7.34%, 2064 bond at the auction.

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 6.76-6.83% on Friday. On Thursday, the 7.10%, 2034 bond closed at INR 101.89, or 6.82% yield, and the 6.79%, 2034 bond ended at INR 99.97, or 6.79% yield.

OIS RATES

Swap rates will take cues from the movement of US Treasury yields after the US FOMC outcome at 0030 IST on Friday. The US panel is seen cutting interest rates by 25 bps, which is already discounted by the market, and comments from US Fed Chair Powell are more closely watched for.

The swap rate in the one-year segment is seen at 6.45-6.65% and in the five-year segment at 6.25-6.42%. On Thursday, the one-year swap rate closed at 6.53% and the five-year swap closed at 6.30%. 

CALL

On Friday, the three-day call money rate may open near the RBI's repo rate of 6.50% because of demand for funds from banks to meet the reserve requirements. During the day, the call rate is seen in a range of 6.00-6.60%, dealers said. On Thursday, the one-day call rate ended at 5.75%.

RBI AUCTION

--Govt to auction two gilts worth INR 220 bln

LIQUIDITY

--Total net inflows of INR 15.55 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 15.55 billion as coupon on state bonds

--INR 512.30 billion as redemption of overnight variable rate reverse repo

* Outflows

--Nil

End

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

Reported by Srijita Bose

Edited by Deepshikha Bhardwaj

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