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Informist, Wednesday, Nov. 13, 2024

MUMBAI – On Thursday, government bond prices and overnight indexed swap rates may take cues from the movement in US Treasury yields after the release of US CPI data for October at 1900 IST. US consumer inflation rose to 2.6% in October from 2.4% in September, in line with expectations. 

Following the release, the odds of a 25-basis-point rate cut in the US in December rose to 75% from around 60% before the inflation data, according to the CME FedWatch tool. Traders will look out for comments from US Federal Reserve Jerome Powell later this week for cues on US interest rates.

However, the impact of the comments will not be felt until next week in India, as money markets are shut on Friday for Guru Nanak Jayanti, dealers said. The movement of crude oil prices may also affect gilts and swap rates.

On Thursday, the four-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.

GOVT BONDS

On Thursday, prices of government bonds may take cues from the movement in US yields following the US CPI data for October, dealers said. Volatility may be limited ahead of the weekly gilt auction. The government will sell INR 140 billion of the 7.04%, 2029 gilt, INR 130 billion of a new 2039 gilt and INR 100 billion of the 7.09%, 2054 gilt at 1030-1130 IST.

The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.80-6.88% on Thursday. The yield on the 6.79%, 2034 bond is seen at 6.76-6.84%. On Wednesday, the 7.10%, 2034 bond closed at INR 101.79, or 6.84% yield, and the 6.79%, 2034 bond ended at INR 99.90, or 6.80% yield.

OIS RATES

On Thursday, swap rates may take cues from the movement in US yields following US consumer inflation for October. Any reassessment of the US rate view may also impact India's swap rates, dealers said.  US Fed Chair Jerome Powell's speech on Thursday is also keenly awaited, though swap rates will only react next week.

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 Wednesday, the one-year swap rate closed at 6.55% and the five-year swap closed at 6.30%. 

CALL

On Thursday, the four-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 6.00-6.60%, dealers said. On Wednesday, the one-day call rate ended at 6.60%.

RBI AUCTION

--RBI to hold INR 1.75 trillion 15-day variable rate reverse repo

--Govt to auction three gilts worth INR 370 billion

LIQUIDITY

--Total net inflows of INR 621.38 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 71.51 billion on redemption of 182-day T-bills

--INR 90.17 billion on redemption of 364-day T-bills

--INR 650.80 billion on redemption of 9.15%, 2024 gilt

--INR 29.77 billion as coupon on 9.15%, 2024 gilt

--INR 5.54 billion as coupon on state bonds

--INR 246.97 billion on redemption of 14-day VRRR

--INR 619.60 billion on redemption of 3-day VRRR

--INR 291.50 billion on redemption of 2-day VRRR

--INR 497.32 billion on redemption of overnight VRRR

* Outflows

--INR 88.74 billion as payment on 91-day T-bills

--INR 75.00 billion as payment on 182-day T-bills

--INR 62.67 billion as payment on 364-day T-bills

End

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

Reported by Cassandra Carvalho

Edited by Akul Nishant Akhoury

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