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Informist, Wednesday, Dec. 4, 2024

MUMBAI – Government bond prices may open steady Thursday as market participants are well positioned for the outcome of the Reserve Bank of India's Monetary Policy Committee meeting on Friday, dealers said. Overnight indexed swap rates are expected to open steady as well, while dealers also see a downside bias on swap rates due to bets on a repo rate cut.

Domestic traders will also look out for further news on geopolitical tensions, dealers said. The movement of US Treasury yields will also be closely watched after the comments of US Federal Reserve Chair Jerome Powell past midnight, which could lend cues to both gilts and swaps at open, dealers said.

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

GOVERNMENT BONDS

On Thursday, bond prices may open steady ahead of the MPC outcome Friday as dealers say they are well positioned for the RBI's expected measures to ease monetary policy. Traders may continue to pick up gilts despite the sharp rise in prices over the last few days, with a 25-bps rate cut or an open market purchase calendar being the biggest potential positives for bonds.

Dealers expect foreign inflows to continue after the lower GDP print for Jul-Sept raised hopes of a rate cut by the MPC. Foreign banks tend to reduce their trading activity near the year-end as they close accounts for their balance sheets, but have been net buyers of gilts since last Friday.

Traders also await any news on the extension of tenure of RBI Governor Shaktikanta Das. His term ends on Tuesday, and the announcement on either an extension of term or appointment of a successor is expected this week.

The yield on 6.79%, 2034 bond is seen at 6.62-6.70% Thursday. On Wednesday, the 10-year benchmark 6.79%, 2034 gilt settled at INR 100.74, or 6.68% yield.

OIS RATES

Swap rates may open steady as traders may be cautious ahead of the MPC outcome on Friday, and trade volumes may decline. There may be a downside bias in OIS rates due to bets on a repo rate cut, but any fall will likely be limited as swap rates have hit psychologically crucial levels which may be hard to break, dealers said.

The swap rate in the one-year segment is seen at 6.26-6.36% and in the five-year segment at 5.95-6.05%. On Wednesday, the one-year swap rate ended at 6.31% and the five-year swap rate closed at 6.00%.

CALL

The one-day call money rate may open near the RBI's repo rate of 6.50% due to demand for funds from banks early in the trade to meet 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 ended at 6.40%. 

RBI AUCTION

--Nil

LIQUIDITY

--Total net inflows of INR 105.69 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 165.01 billion on redemption of 91-day T-bills

--INR 50.00 billion on redemption of 182-day T-bills

--INR 106.00 billion on redemption of 364-day T-bills

--INR 14.55 billion as coupon on state bonds

--INR 42.03 billion as coupon on 8.97%, 2030 gilt

--INR 31.52 billion as coupon on 6.57%, 2033 gilt

* Outflows

--INR 167.37 billion as payment on 91-day T-bills

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

--INR 61.01 billion as payment on 364-day T-bills

End

Reported by Vidhushi RajPurohit

Edited by Ashish Shirke

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