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Informist, Thursday, Dec. 19, 2024

MUMBAI – Government bond prices and overnight indexed swap rates are seen taking cues on Friday from the movement in US Treasury yields overnight, dealers said. The movement in US yields, which surged Thursday, is seen as key before the release of inflation data in the US.

Traders may be cautious about placing large bets on gilts ahead of the weekly auction at 1030-1130 IST. The government will sell INR 140 billion of a new five-year, 2029 gilt and INR 150 billion of the 7.34%, 2064 gilt.

Comments by the Reserve Bank of India's Monetary Policy Committee members in the minutes of its December policy meeting are also awaited, dealers said. The minutes are scheduled to be released at 1700 IST Friday. Traders may also take cues from geopolitical developments and the movement in crude oil prices.

On Friday, the three-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 Friday, prices of government bonds may take cues from the overnight movement in US yields before US Personal Consumption Expenditure data, due post market hours, dealers said. Traders will also be watchful before the INR 290-billion gilt auction at 1030-1130 IST.

Traders said the demand for fresh supply would be the next domestic cue for the market. Demand for the new 5-year bond is expected to come from state-owned banks and private banks, while for the longer-tenure bond, life insurers are likely to bid, albeit at higher yields, dealers said. 

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.75-6.83% on Friday. On Thursday, the 2034 gilt settled at INR 100.02, or 6.79% yield.

OIS RATES

On Friday, swap rates will take cues from overnight movement in US yields ahead of the release of US Personal Consumption Expenditure data for November post market hours. Offshore traders are likely to abstain from participating in the swaps market as they prepare to close their books ahead of year-end, dealers said.

The swap rate in the one-year segment is seen at 6.48-6.58% and in the five-year segment at 6.15-6.30%. On Thursday, the one-year swap rate ended at 6.54% and the five-year swap rate closed at 6.20%.

CALL

On Friday, the three-day call money rate may open near the MSF 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 Thursday, the one-day call rate ended at 5.75%.

RBI AUCTION

--Government to sell INR 290 billion of two gilts 1030-1130 IST

--RBI to conduct 7-day VRR auction worth INR 1.75 trillion 1000-1030 IST

LIQUIDITY

--Total net inflows of INR 55.86 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 44.46 billion as coupon on 7.38%, 2027 gilt

--INR 11.40 billion as coupon on state bonds

* Outflows

--INR 757.75 billion as redemption of 4-day variable rate repo

--INR 500.05 billion as redemption of 3-day variable rate repo

End

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

Reported by Aaryan Khanna

Edited by Avishek Dutta

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