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Informist, Tuesday, Nov. 19, 2024

MUMBAI – Government bonds and overnight indexed swap rates may Thursday take cues from the movement in US yields and crude oil prices amid an escalation in the conflict between Russia and Ukraine, dealers said. Money markets are closed Wednesday on account of Maharashtra Assembly elections.

Traders await the US November flash manufacturing and services purchasing managers' index data, due post market hours on Friday, for cues on the US rate cut trajectory. On the domestic front, there is a lack of fresh triggers currently and the market's focus will be on the GDP data for the quarter ended September, due on Nov. 29. 

On Thursday, the one-day call money rate may open around the RBI's repo rate of 6.50% due to demand for funds from banks in early trading hours to meet the reserve requirements.

GOVERNMENT BONDS

On Thursday, prices of government bonds may take cues from the movement in US yields and crude oil prices amid an escalation in the conflict between Russia and Ukraine, dealers said.

Prices could remain in a thin range and trade volumes may be low amid lack of any fresh cues on interest rates, and on caution ahead of India's Jul-Sept GDP data next week. Some traders may be away on account of a long holiday after Maharashtra elections, dealers said.

Domestic GDP growth slowing to 6.5% or lower in Jul-Sept is seen setting the stage for rate cuts by the Reserve Bank of India's MPC even as early as December, dealers said. However, the consensus rate cut view is February, as long as the print is near the RBI's forecast of 7% for the September quarter. A higher-than-forecast reading, which is highly unlikely, would lead to a reassessment of rate cut views, dealers said. 

Traders might also place short bets and trim their holdings on Thursday ahead of the weekly gilt auction Friday. The government will sell INR 220 billion worth of the 6.79%, 2034 gilt and INR 100 billion of a new 40-year paper.

The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.81-6.88% on Thursday. The yield on the 6.79%, 2034 bond is seen at 6.79-6.86%. On Tuesday, the 7.10%, 2034 bond closed at INR 101.73, or 6.85% yield, and the 6.79%, 2034 bond ended at INR 99.83, or 6.81% yield.

OIS RATES

On Thursday, swap rates may take cues from the overnight movement in the US yields and crude oil prices. Any further escalation in the Russia-Ukraine war will be tracked for cues, dealers said.

The swap rate in the one-year segment is seen at 6.45-6.63% and in the five-year segment at 6.18-6.33%. On Tuesday, the one-year swap rate closed at 6.53% and the five-year swap closed at 6.24%. 

CALL

On Thursday, the one-day call money rate may open around the RBI's repo rate of 6.50% due to demand for funds from banks in early trading hours to meet the reserve requirements.

During the day, the call rate is seen in a range of 6.00-6.60%, dealers said. On Tuesday, the two-day call rate ended at 5.75%.

RBI AUCTION

--RBI to auction Treasury bills worth INR 190 bln on Thursday

LIQUIDITY

--Total net inflows of INR 179.07 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 3.47 billion as coupon on state bonds on Wednesday

--INR 170.00 billion on redemption of 91-day T-bills on Thursday

--INR 91.08 billion on redemption of 364-day T-bills on Thursday

--INR 8.01 billion as coupon on state bonds on Thursday

* Outflows

--INR 93.49 billion payment on state bonds on Thursday

End

Reported by Srijita Bose

Edited by Vandana Hingorani

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