India Money Market Outlook
Gilts, swaps seen taking cues from US yields Mon
This story was originally published at 20:21 IST on 27 December 2024
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NEW DELHI – Government bond prices and overnight indexed swap rates may take cues from US Treasury yields on Monday, due to a lack of significant domestic cues, dealers said. Money markets are shut on Saturday.
Geopolitical developments and crude oil price movements may impact bond prices and swap rates. The movement in the rupee, after hitting several record lows against the dollar this week, may also lend cues. Several traders are on holiday ahead of the New Year, which may keep volumes muted in both markets.
On Monday, the one-day call money rate may open above the policy repo rate of 6.50% due to the demand for funds from banks.
GOVERNMENT BONDS
On Monday, gilt prices may take cues from the US Treasury yields at open, dealers said. Volume is expected to remain muted as many traders are on leave. Quarter-end credit demand may keep investment activity of even domestic banks muted, dealers said.
Gilt prices will also track the movement of the Indian rupee against the dollar after it hit a series of record lows this week.
The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.77-6.81% during the day. On Friday, the 2034 bond settled at INR 100.02, or 6.79% yield.
OIS RATES
On Monday, swap rates will take cues from the movement in US yields, dealers said. The movement in the rupee against the dollar could also influence the rates during the day after the Indian unit hit a record low against the greenback on Friday.
Trade volumes could be low during the week as several traders are on holiday 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 Friday, the one-year swap rate ended at 6.53% and the five-year swap rate closed at 6.23%.
CALL
On Monday, 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 6.00-6.80%, dealers said. On Friday, the three-day call rate ended at 6.80%.
RBI AUCTION
--Nil
LIQUIDITY
--Total net outflows of INR 253.38 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 33.72 billion as coupon on state bonds on Saturday
--INR 19.92 billion as coupon on state bonds on Sunday
--INR 12.98 billion as coupon on state bonds on Monday
* Outflows
--INR 320.00 billion as payment for gilt auction
End
Reported by Aaryan Khanna
Edited by Saji George Titus
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