Informist, Thursday, Nov 30, 2023
By Aaryan Khanna
NEW DELHI – Overnight indexed swap rates ended higher, tracking a rise in crude oil prices, and mutual funds continued paying fixed rates to protect their underlying investments in bonds, dealers said.
The one-year swap rate settled at 6.88%, compared with 6.86% on Wednesday. The five-year swap rate ended at 6.52%, compared with 6.48% the previous day.
“Most of the paying is because of mutual funds hedging their corporate bond buys,” a dealer at a primary dealership said. “Foreign banks will not move to pay unless US yields move in the same direction, and without foreign players, the market will not go anywhere.”
Bank of Baroda today raised 50 bln rupees via 10-year infrastructure bonds, Informist reported today. There are a slew of issuances scheduled on Friday, dealers said.
Foreign banks likely unwound their received fixed rate bets on caution ahead of US personal consumption expenditure data for October, dealers said. The release, which is the Federal Reserve’s preferred inflation gauge, is scheduled after market hours.
Crude oil prices rose ahead of the meeting of the Organization of the Petroleum Exporting Countries and its allies later today to discuss the extension or deepening of supply cuts. OPEC and its allies are mulling production cuts of as much as 1 mln bbl a day extending for the entirety of 2024, according to media reports.
Brent crude for January delivery was at $83.74 a bbl at the end of Indian market hours, compared to $83.10 a bbl on Wednesday. Though trade volumes had picked up in both the one- and five-year swaps, the volatility was muted ahead of the fresh data in the US, as well as before the Monetary Policy Committee meeting next week, dealers said.
On the domestic front, traders were cautious ahead of the GDP data release for Jul-Sep. India’s GDP grew sharply higher than expected at 7.6% in Jul-Sep, driven by double-digit growth in industry, data released after market hours by the National Statistical Office showed.
Traders seek further signals on India’s monetary policy at the Monetary Policy Committee meeting on Dec 6-8 before receiving OIS rates up to one-year aggressively, dealers said.
Rate cuts in India still seem unlikely within the next 12 months, even as some hope was creeping in that the country’s rate-setting panel could also cut rates in Jul-Sep if the US Federal Open Market Committee begins lowering these by June, dealers said.
“We are on a fundamentally different path from the US,” a dealer at a private bank said. “The five-year swap has reacted in a healthy manner to the movement in US yields, but incrementally there is no fresh trigger before MPC.”
OUTLOOK
On Friday, swap rates may fall as India’s GDP growth was higher than anticipated, likely putting a dampener of rate cut bets in the next 12 months, dealers said.
India’s GDP grew sharply higher than expected at 7.6% in Jul-Sep, driven by double-digit growth in industry, data released after market hours by the National Statistical Office showed. An Informist poll of 21 economists had projected the reading at 6.8%.
Inflation data in the US will also be closely watched on Thursday.
A sharp move in US Treasury yields and crude oil prices may also lend cues at the opening.
The swap rate in the one-year segment is seen at 6.78-7.00%, and in the five-year segment at 6.40-6.60%.
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Deepshikha Bhardwaj
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