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Informist, Thursday, Dec. 5, 2024

MUMBAI – Government bond prices and overnight indexed swap rates may open steady Friday as market participants will wait for the outcome of the Reserve Bank of India's Monetary Policy Committee meeting at 1000 IST, dealers said. They also see players holding back swap deals owing to caution over policy rate decision.

The decision on cash reserve ratio and policy rates will impact the trajectory of gilt prices and swap rates. Traders also await any news on the extension of tenure of RBI Governor Das. His term ends on Tuesday, and the announcement on either an extension of term or appointment of his successor is expected this week.

Domestic traders will also look out for news on geopolitical tensions, dealers said. The movement of US Treasury yields will also be watched after US initial jobless claims data, but the MPC outcome would be the most significant cue, dealers said.

On Friday, the three-day call money rate may open near the RBI's repo rate of 6.50% due to demand for funds from banks amid caution ahead of the outcome of the RBI's monetary policy committee meeting.

GOVERNMENT BONDS

On Friday, bond prices may open steady ahead of the MPC outcome. While some traders expect the rate-setting panel to cut the policy repo rate by 25 basis points from 6.50%, others expect liquidity conditions to be eased, dealers said.

Traders are positive that more than one external member of the rate-setting panel will vote for a rate cut in the policy meeting and the committee will shift its focus towards supporting growth, dealers said. In the last meeting in October, external member Nagesh Kumar voted for a rate cut while others had favoured a status quo.

Traders may also place bets ahead of the weekly gilt auction, but dealers said the MPC outcome will impact the demand at auction. The government will sell three gilts worth INR 300 billion between 1230 IST and 1330 IST on Friday.

The yield on the 6.79%, 2034 bond is seen at 6.60-6.77% Friday. On Thursday, the 10-year benchmark bond settled at INR 100.77, or 6.68% yield.

OIS RATES

Swap rates may see a delayed open, before the RBI Governor Shaktikanta Das presents the MPC outcome at 1000 IST. Swaps are likely to open steady as traders may remain cautious. Trade volumes may pick up after Das' address, and swaps are expected to rise or fall in a range of 10 bps, in an upward or downward direction, depending on the outcome. 

The swap rate in the one-year segment is seen at 6.22-6.42% and in the five-year segment at 5.90-6.10%. On Thursday, the one-year swap rate ended at 6.32% and the five-year swap rate closed at 6.00%.

CALL

The three-day call money rate may open near the RBI's repo rate of 6.50% due to demand for funds from banks on caution ahead of the outcome of the RBI's monetary policy committee meeting. During the day, the call rate is seen in a range of 6.00-6.60%, dealers said. On Thursday, the one-day call ended at 6.70%. 

RBI AUCTION

--Government to auction three gilts worth INR 300 billion

LIQUIDITY

--Total net inflows of INR 14.01 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 14.01 billion as coupon on state bonds

* Outflows

--Nil

End

Reported by Vidhushi RajPurohit

Edited by Ashish Shirke

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