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Informist, Wednesday, Dec. 18, 2024

MUMBAI – On Thursday, prices of government bonds and overnight indexed swap rates may take opening cues from overnight movement in US Treasury yields after the US Federal Open Market Committee makes its decision at 0030 IST Thursday. 

While traders have already priced in a 25-basis-point cut by the FOMC, they will look for any indications of US president-elect Donald Trump's impact on the US Federal Reserve's policy decisions. Traders will watch out for US Federal Reserve officials' comments on the future interest rate trajectory in the world's largest economy.

Fears that the FOMC may project only two or three rate cuts instead of four next year have driven US yields up to November's levels. A slower pace of rate cuts in the US could delay the MPC's decision to cut rates from the currently expected timeline of February. Any major geopolitical developments and movement in crude oil prices could also lend cues to gilts and swaps at the open.

On Thursday, the one-day call money rate may open near the Marginal Standing Facility rate of 6.75% due to demand for funds from banks.

GOVERNMENT BONDS

On Thursday, prices of government bonds may take opening cues from overnight movement in US yields after the outcome of the FOMC's meeting. Further pressure on the rupee could also weigh on gilt prices as traders fear that a weakening currency might deter the RBI from lowering policy rates.

The yield on the 6.79%, 2034 bond is seen at 6.69-6.79% on Thursday. On Wednesday, the 10-year benchmark 6.79%, 2034 gilt settled at INR 100.30, or 6.75% yield.

OIS RATES

On Thursday, swap rates will take cues from overnight movement in US yields after the FOMC's policy statement. Tight liquidity conditions in the banking system may result in upward pressure on swap rates. 

The swap rate in the one-year segment is seen at 6.40-6.52% and in the five-year segment at 6.05-6.15%. On Wednesday, the one-year swap rate ended at 6.46% and the five-year swap rate closed at 6.10%.

CALL

On Thursday, the one-day call money rate may open near the Marginal Standing Facility rate of 6.75% due to demand for funds from banks. During the day, the call rate is seen in a range of 6.00-6.85%, dealers said. On Wednesday, the one-day call ended at 5.85%.

RBI AUCTION

--Nil

LIQUIDITY

--Total net inflows of INR 63.39 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 85.49 billion on redemption of 182-day T-bills

--INR 91.56 billion on redemption of 364-day T-bills

--INR 9.95 billion as coupon on state bonds

--INR 42.79 billion as coupon on 7.73%, 2034 gilt

--INR 57.46 billion as coupon on 7.41%, 2036 gilt

--INR 71.18 billion as coupon on 7.30%, 2053 gilt

* Outflows

--INR 166.00 billion as payment on 91-day T-bills

--INR 68.00 billion as payment on 182-day T-bills

--INR 61.02 billion as payment on 364-day T-bills

End

Reported by Cassandra Carvalho and Vidhushi RajPurohit

Edited by Avishek Dutta

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