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Informist, Saturday, Dec. 7, 2024

MUMBAI – Indian bond prices and swap rates are likely to track movements in US Treasury yields following the release of US non-farm payrolls data, according to dealers.

The US non-farm payrolls report, released after market hours on Friday, largely met expectations despite distortions caused by recent strikes and hurricanes. The data showed a 227,000 increase in jobs in November, following an upwardly revised 36,000 rise in October. Economists polled by Reuters had predicted a rise of 200,000. However, the report also showed a larger-than-expected rise in unemployment, adding to the mixed labour market signals.

Market participants will also monitor comments by Cleveland Federal Reserve President Beth Hammack for further cues on US yield direction.

After Friday's fall in prices due to the outcome of the Monetary Policy Committee's meeting, dealers expect foreign investors to sell gilts more next week. Additionally, traders are awaiting news on a potential extension for RBI Governor Shaktikanta Das' tenure, which ends on Tuesday. An announcement regarding either an extension or the appointment of a successor is anticipated.

Movement in crude oil prices will be another key factor influencing the domestic money market, dealers added.

GOVERNMENT BONDS

On Monday, Indian government bond prices are expected to follow the movement of US Treasury yields after the release of US non-farm payrolls data, according to dealers. After Friday's drop in bond prices due to the Reserve Bank of India’s Monetary Policy Committee announcement, dealers anticipate foreign investors to continue selling gilts next week.

Any developments concerning Das' tenure will also influence the movement of swap rates and gilt prices. While most market participants expect an extension of his term, the appointment of a new governor perceived to favour monetary easing could provide support to the market, dealers noted.

The yield on the 6.79%, 2034 bond is seen at 6.72-6.80% on Monday. On Friday, the 10-year benchmark bond settled at INR 100.31, or 6.74% yield.

OIS RATES

Swap rates are likely to be influenced by US Treasury yield movements following the release of the US November employment data. US yields may also take cues from comments by US Federal Reserve Bank of Cleveland President Beth Hammack.

News regarding the extension of RBI Governor Das' tenure or the appointment of a successor will also impact swap rates. Das' term ends on Tuesday, and most traders expect an extension. However, if a new governor with a more dovish stance on monetary policy is appointed, it could be seen as favourable for traders, dealers said.

Movements in crude oil prices will also be closely watched, dealers noted. The swap rate in the one-year segment is seen at 6.40-6.48% and in the five-year segment at 6.04-6.12%. On Friday, the one-year swap rate ended at 6.44% and the five-year swap rate closed at 6.08%.

CALL

On Monday, the one-day call money rate may open above the RBI's repo rate of 6.50%, driven by early demand from banks to meet reserve requirements. During the day, the call rate is seen in a range of 6.00-6.75%, dealers said. On Saturday, the two-day call rate ended at 6.00%, against 6.24% for three-day loans on Friday.

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

Reported by Sachi Pandey

Edited by Avishek Dutta

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