Informist, Tuesday, Mar 28, 2023
By Anjali
NEW DELHI – Overnight indexed swap rates ended higher today as traders paid fixed rates tracking a rise in US Treasury yields, dealers said. However, traders avoided placing large bets ahead of the Monetary Policy Committee’s decision next week, dealers said.
The one-year swap rate settled at 6.79%, against 6.75% on Monday. The five-year swap rate ended at 6.27% against the previous day’s close of 6.24%.
“The market opened higher and moved in a narrow range, even though US yields surged today, due to caution around rate hike,” a dealer at a private bank said. “Off-shore traders are also looking at Reserve Bank of India’s decision.”
The meeting of the Monetary Policy Committee is scheduled on Apr 3, 5 and 6. Traders largely expect the rate-setting panel to go for a 25-basis-point rate hike.
They also expect the repo rate to top out at 6.75% after a final hike of 25 bps in April, dealers said. However, some dealers said that with each passing day, the number of people betting on a pause is slowly increasing.
Traders are also waiting for the government’s borrowing calendar for the new financial year starting Apr 1. Informist had reported on Mar 14, quoting a senior finance ministry official, that the government might continue with the practice of front-loading its borrowing in the first half of the year, where it may opt to conduct 55-58% of gross bond issuances in Apr-Sep. In absolute terms, this works out to 8.49-8.95 trln rupees. The government’s gross borrowing target for 2023-24 (Apr-Mar) is 15.43 trln rupees.
“The new supply will lend some cues to the market. Till then, the volume will continue to remain low,” a dealer at a primary dealership said. “There is some activity in the first year due to expectations of a pause among some segments, not sure who they are.”
The yield on the 10-year US Treasury note rose to 3.57% by the end of Indian market hours from 3.47% at close on Monday. US Treasury yields rose as risk-off sentiment eased due to growing optimism that the crisis in the global banking sector would soon fade.
OUTLOOK
On Wednesday, swap rates are seen steady due to lack of significant cues in the domestic market, dealers said. Traders may also watch out for any sharp movement in US Treasury yields and crude oil prices at open.
The swap rate in the one-year segment is seen at 6.70-6.80%, and the five-year at 6.15-6.30%.
End
Edited by Ashish Shirke
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