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Informist, Saturday, Dec. 21, 2024

MUMBAI – On Monday, government bonds and overnight indexed swap rates will likely take cues from the minutes of the Monetary Policy Committee's meeting held earlier this month and the movement of US Treasury yields after US inflation data was released Friday, 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-basis points cut at the 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.

On Monday, the one-day call money rate may open above the RBI's repo rate of 6.50% due to demand for funds early in the day from banks to meet their reserve requirements. During the day, the call rate is seen in a range of 6.00-6.80%, dealers said.

GOVERNMENT BONDS

Bond prices may take cues from the minutes of the MPC meeting held earlier this month. 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

Swap rates will take cues from the movement in US yields after the US personal consumption expenditure data for November was released Friday. 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%.

CALL

On Monday, the one-day call money rate may open above the RBI's repo rate of 6.50% due to demand for funds from banks early in the day to meet reserve requirements. During the day, the call rate is seen in a range of 6.00-6.80%, dealers said. On Saturday, the two-day call rate ended at 6.25%, against 6.85% for three-day loans on Friday.

RBI AUCTION

--Nil 

LIQUIDITY

--Total net outflows of INR 189.78 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 7.69 billion as coupon on state bonds on Sunday

--INR 39.84 billion as coupon on 8.13%, 2045 gilt on Sunday

--INR 16.02 billion as coupon on state bonds on Monday

--INR 36.68 billion as coupon on 8.13%, 2045 gilt on Monday

* Outflows

--INR 290 billion as payment of gilt auction on Monday

End

Reported by Vidhushi RajPurohit

Edited by Ashish Shirke

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