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Informist, Tuesday, Dec. 24, 2024

MUMBAI – On Thursday, government bond prices and swap rates are expected to take cues from US Treasury yields due to a lack of domestic cues. Trading volumes are likely to be low due to the Christmas break and year-end closures. Indian financial markets will be closed on Wednesday for Christmas.

A weakening rupee may reduce demand from foreign investors, while geopolitical developments and crude oil price movements may impact bond prices and swap rates. Tight liquidity conditions may push short-term swap rates up on Thursday. 

The one-day call money rate is expected to open above the repo rate of 6.50% on Thursday, driven by demand for funds from banks.

GOVERNMENT BONDS

On Thursday, traders expected lacklustre trading volumes as several dealers are on leave between Christmas and the New Year, dealers said. 

Prices of government bonds may take cues from the movement in US Treasury yields. The weakening domestic currency--the rupee fell to a record low against the dollar Tuesday--may weigh on demand of gilts from foreign investors. Activity from foreign banks and offshore investors is seen limited until the new year, dealers said.

The yield on the 6.79%, 2034 bond is seen at 6.74-6.82% on Thursday. On Tuesday, the 10-year benchmark bond settled at INR 100.09, or 6.77% yield.

OIS RATES

On Thursday, swap rates will take cues from the movement in US yields on lack of domestic cues, dealers said.

Trade volumes could be low during the week as several traders will be on leave in a Christmas-shortened week ahead of the New Year. Activity from foreign banks and foreign portfolio investors could also be muted as they close their accounts at the end of the year, dealers said.

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 Tuesday, the one-year swap rate ended at 6.52% and the five-year swap rate closed at 6.21%.

CALL

On Thursday, the one-day call money rate may open above the repo rate of 6.50% due to the demand for funds from banks. During the day, the call rate is seen in a range of 6.00-6.75%, dealers said. On Tuesday, the two-day call rate ended at 6.00%.

RBI AUCTION

--RBI to auction 91-day, 182-day, and 364-day T-bills worth INR 190 billion on Thursday

LIQUIDITY

--Total net outflows of INR 88.80 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 3.66 billion as coupon on state bonds

--INR 40.00 billion on redemption of 182-day T-bills

--INR 111.10 billion on redemption of 364-day T-bills

--INR 21.76 billion as coupon on state bonds

--INR 40.68 billion as coupon on 6.79%, 2029 gilt

* Outflows

--INR 306.00 billion as payment on state bonds

End

Reported by Sachi Pandey

Edited by Akul Nishant Akhoury

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