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Informist, Saturday, Nov. 30, 2024

MUMBAI – On Monday, bond prices are likely to open steady, dealers said. Traders expect bond prices to consolidate gains, following India's GDP growth slowing sharply in Jul-Sept.

Swap rates may open lower Monday as traders may bet on a larger size and pace of rate cuts in India after lower-than-expected GDP data for the quarter ended September, dealers said.

India's GDP growth fell to a seven-quarter low of 5.4% in Jul-Sept, sharply lower than the consensus estimate of 6.5% and the Reserve Bank of India's projection of 7.0%. India's growth rate was battered by a slump in the growth on industrial activity.

The market's focus will be on the RBI's possible actions at the MPC meeting on Friday. While some traders expect a rate cut, others said that the central bank at minimum would announce a liquidity injection into the banking system through either a cash reserve ratio cut or open market purchases of bonds.

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

GOVERNMENT BONDS

On Monday, bond prices are likely to open steady, dealers said. Traders expect bond prices to consolidate gains following India's GDP growth slowing sharply in Jul-Sept. The bond market's focus will be on the RBI's possible action at the MPC meeting. The outcome of the meeting will be announced on Dec. 6.

Any escalation in conflicts in West Asia and Russia-Ukraine may negatively impact gilt prices at the market opening. The movement of US yields and crude oil prices could also lend cues to bond prices.

The yield on the 6.79%, 2034 bond is seen at 6.71-6.77% Monday. Friday, the 10-year benchmark gilt settled at INR 100.33, or 6.74% yield.

OIS RATES

On Monday, swap rates may open lower as traders may continue to bet on the timeline of a rate cut in India after lower-than-expected GDP data for the quarter ended September, dealers said. 

The market remains divisive on the timeline of rate cuts on the domestic front. While a majority of traders now expect the RBI's rate setting panel to cut rates in December, a few still expect rate cuts to happen in February due to sticky inflation, dealers said. 

Domestic traders will also look out for further news on geopolitical tensions, dealers said. The movement of US yields will also be closely watched, dealers said. 

The swap rate in the one-year segment is seen at 6.30-6.47% and in the five-year segment at 5.98-6.10%. On Friday, the one-year swap rate ended at 6.36% and the five-year swap rate closed at 6.04%.

CALL

On Monday, the one-day call money rate may open above the RBI's repo rate of 6.50% due to early demand for funds from banks to meet reserve requirements. During the day, the call rate is seen in a range of 6.00-6.75%, dealers said.

RBI AUCTION

--Nil

LIQUIDITY

--Total net outflows of INR 165.68 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 35.34 billion as coupon on 5.85%, 2030 gilt on Sunday

--INR 40.42 billion as coupon on 8.17%, 2044 gilt on Sunday

--INR 45.68 billion as coupon on 8.60%, 2028 gilt on Monday

--INR 12.88 billion as coupon on state bonds on Monday

* Outflows

--INR 300.00 billion on payment of gilts on Monday

End

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

Reported by Sourabh Kumar

Edited by Deepshikha Bhardwaj

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