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Informist, Monday, Nov. 11, 2024

MUMBAI – Government bond prices and overnight indexed swap rates may open steady on Tuesday ahead of India's CPI data for October due at 1600 IST. Both markets may be volatile as the data is being released during market hours for the first time in many years, dealers said.

India's CPI inflation in October likely rose to a 14-month high of 5.9%, from 5.49% in September, according to the median of an Informist poll. This is the last CPI print before the Monetary Policy Committee's December meeting and will be crucial to gauge whether the panel could opt for a rate cut in December. The movement in US Treasury yields and crude oil prices may lend cues at the open, 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

Government bond prices are seen steady on Tuesday as traders may avoid large bets ahead of CPI data, dealers said. Losses could be limited as traders have already built up a large quantum of short bets, which they may cover if gilt prices fall, they said. 

Traders also await the release of US CPI data due post-market hours on Wednesday, dealers said. In addition, comments by US Federal Reserve officials, including by US Federal Reserve Chair Jerome Powell, later in the week will also be tracked keenly for cues on the interest rate cut cycle in the US, especially since the victory of Donald Trump in the presidential election.

The yield on the 10-year benchmark, 7.10%, 2034 bond is seen at 6.78-6.88%. The yield on the 6.79%, 2034 bond is seen at 6.74-6.84%. On Monday, the 7.10%, 2034 bond closed at INR 101.89, or 6.82% yield, and the 6.79%, 2034 bond ended at INR 100.01, or 6.79% yield.

OIS RATES

On Tuesday, swap rates may open steady on caution ahead of India's CPI data. Traders also await the release of US CPI data due post-market hours on Wednesday for cues on the US interest rate cycle, dealers said.

The swap rate in the one-year segment is seen at 6.43-6.60% and in the five-year segment at 6.20-6.40%. On Monday, the one-year swap rate closed at 6.53% and the five-year swap closed at 6.26%. 

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 6.00-6.60%, dealers said. On Monday, the one-day call rate ended at 5.50%.

RBI AUCTION

--RBI to hold INR 1 tln, 2-day VRRR

--5 states to raise INR 54 bln via bond sale

LIQUIDITY

--Total net inflows of INR 81.70 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 9.50 billion as coupon on state bonds

--INR 72.20 billion on 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 Saji George Titus

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