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Informist, Friday, Dec. 20, 2024

MUMBAI – On Saturday, the two-day call money rate may open below the Reserve Bank of India's repo rate of 6.50% due to low demand for funds as banks have already met their regulatory requirements. As is usually the case on Saturdays, trade volume is expected to be low. During the day, the call rate is seen in a range of 6.10-6.50%, dealers said. Friday, the three-day call rate ended at 6.85%.

Government bonds and overnight indexed swap rates are not traded on Saturday. On Monday, gilts, swap rates may likely take cues from the minutes of the Monetary Policy Committee's December meeting, along with the movement of US Treasury yields after US inflation data, dealers said. Core personal consumption expenditure inflation--the US Federal Reserve's preferred inflation gauge--was 2.8% on year in November, against 2.9% expected in a survey by The Wall Street Journal.

Comments by MPC members in the minutes for December would also be assessed for direction, dealers said. Two external members--Nagesh Kumar and Ram Singh, who also voted for a 25-bps cut at the December meeting, spoke along pro-rate cut lines, while the third external member Saugata Bhattacharya's comments sided with status quo on rates. The geopolitical developments in West Asia and Eastern Europe will also be keenly tracked.

GOVERNMENT BONDS

The gilt market is shut on Saturdays. On Monday, prices of government bonds may take cues from the minutes of the MPC meeting held earlier this month, released at 1700 IST. While the rupee recovered slightly from a lifetime low, any further pressure on the local currency could also weigh on gilt prices as traders fear that a weakening currency may deter the RBI from lowering policy rates. Any major geopolitical developments and movement in crude oil prices could also lend cues to gilts at opening. The yield on the 6.79%, 2034 bond is seen at 6.75-6.85% on Monday. On Friday, the 10-year benchmark bond settled at INR 99.99, or 6.79% yield.

OIS RATES

Swaps are not traded Saturday. On Monday, swap rates will take cues from the movement in US yields after the release of the US personal consumption expenditure data for November. Tight liquidity conditions in the banking system may result in upward pressure on short-term swap rates. The swap rate in the one-year segment is seen at 6.45-6.65% and in the five-year segment at 6.15-6.30%. On Friday, the one-year swap rate ended at 6.55% and the five-year swap rate closed at 6.23%.

RBI AUCTION

--Nil 

LIQUIDITY

--Total net inflows of INR 6.80 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 6.80 billion as coupon on state bonds

* Outflows

--Nil

End

Reported by Vidhushi RajPurohit and Cassandra Carvalho

Edited by Akul Nishant Akhoury

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