Informist, Thursday, Mar 23, 2023
By Nishat Anjum
MUMBAI – Government bond prices erased most gains by the end of the day tracking an intraday rise in US Treasury yields. Moreover, traders remained vexed during the day about the rate hike view in the US, taking the volatile US yields’ movement into account, dealers said.
Yield on the benchmark 10-year US Treasury note rose to 3.50% towards the end of Indian market hours from 3.45% in early trade.
US Treasury yields remained volatile during the day, as investors digested the Federal Reserve’s policy decision and the central bank’s policy guidance.
Dealers said US yields show the market’s view about Fed rate hike usually with a day’s lag. A single day’s movement of US Treasury yields did not give a clear picture of the interest rate hikes in the future, dealers said.
The 10-year benchmark 7.26%, 2032 bond ended at 99.40 rupees, or 7.35% yield, against the previous close of 99.39 rupees, or 7.35% yield. The 7.26%, 2033 bond ended at 99.52 rupees, or 7.33% yield, against the previous close of 99.48 rupees, or 7.33%.
Money markets were closed on Wednesday on account of Gudi Padwa.
“People mostly booked profits as there was no clarity on the rate view. Much can’t be said just on the basis of US yields,” a dealer at a primary dealership said. “It is too early to take a position on rate hikes. If even one set of data (from the US) causes US Treasury yields movement to change, traders will have to place new bets altogether.”
Dealers said that as there was no change in the Fed’s dot plot, the domestic market remained a bit concerned regarding the trajectory of rate hikes going forward.
The latest dot plot suggests interest rates will continue to tick higher this year, with Fed funds rate seen peaking at 5.1%, the same as the Fed’s December projection.
The US Federal Open Market Committee’s dot plot is a chart that illustrates each committee member’s projection of where the Federal funds rate will be at the end of a particular period.
Moreover, the FOMC said in its statement, “The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.”
Back home, traders still expect the Reserve Bank of India’s Monetary Policy Committee to go for a 25 bps rate hike in April. The market also largely expects the repo rate to top out at 6.75% after a final hike of 25 bps in April, dealers said. Traders expect the domestic bond to trade in a narrow range till the domestic rate-setting meeting outcome.
“In my opinion, it will be premature to talk about a pause by RBI. Core inflation is still above the tolerance limit and has remained sticky for a while now,” a dealer at a state-owned bank said.
“We are also seeing erratic rainfalls. It is yet to be seen if that would affect food prices and then of course, inflation.” Data released on Mar 13 showed that India’s February core inflation, which excludes food and fuel, remained at 6.1% and above 6.0% for the sixth consecutive month.
Moreover, the expectation of a large gilt supply in the new financial year starting Apr 1 weighed on gilt prices, dealers said. The government is expected to raise 8.49 trln rupees in the first half of the next financial year, slightly higher than 8.45 trln rupees it said it would borrow, according to several bond market participants who attended a meeting with the RBI earlier this month.
In early trade, government bond prices rose tracking a fall in US Treasury yields, dealers said. US Treasury yields fell due to expectations that the key policy rate may peak out soon, after the US Fed delivered a 25-bps rate hike on Wednesday and refrained from giving any forward guidance.
On Wednesday, the yield on the benchmark 10-year US Treasury note fell 7 basis points to 3.48% from 3.55% at the end of Indian market hours on Tuesday. A fall in US Treasury yields widens the interest rate differential between the safe-haven asset and emerging market debt, making the latter more appealing to foreign investors.
According to data on RBI’s Negotiated Dealing System-Order Matching platform, the turnover today was 349.45 bln rupees, compared with 225.00 bln rupees on Tuesday. Trades aggregating 50 mln rupees were settled with the digital rupee pilot in one deal today. On Tuesday, no trades were settled with the digital rupee pilot.
OUTLOOK
On Friday, bond prices are seen opening steady due to lack of significant domestic cues, dealers said.
Traders may also take cues from overnight movement in US Treasury yields and crude oil prices.
The yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.30-7.37%.
India Gilts: Off-highs tracking intraday rise in US yields
MUMBAI–1540 IST–Government bond prices were off the day’s high tracking an intraday rise in US Treasury yields, dealers said. Yield on the benchmark 10-year US Treasury note rose to 3.50% during the day from 3.45% early in trade.
“US Treasury yields are a little volatile today. It usually takes one day’s lag to show the exact market view,” a dealer at a private bank said. “People still do not have a clear picture yet of the US Federal Reserve interest rate hikes in the future on the basis of the one-day movement of US yields.”
Dealers said that as there was no change in the Fed’s dot plot, the domestic market remains a bit concerned regarding the trajectory of rate hikes going forward. The latest dot plot suggests interest rates will continue to tick higher this year, with Fed funds rate seen peaking at 5.1%, the same as the Fed’s December projection. US Federal Open Market Committee’s dot plot is a chart that illustrates each committee member’s projection of where the Federal funds rate will be at the end of a particular period.
US Treasury yields fell earlier due to expectations that the key policy rate may peak soon, after the Fed delivered a 25-basis-point rate hike on Wednesday.
Back home, traders still expect the Reserve Bank of India’s Monetary Policy Committee to go for a 25-bps rate hike in April. The market also largely expects the repo rate to top out at 6.75% after a final hike of 25 bps in April, dealers said.
Moreover, a large gilt supply in the new financial year starting April weighed on the gilts, keeping the gains limited, dealers said. The government is expected to raise 8.49 trln rupees in the first half of the next financial year, slightly higher than 8.45 trln rupees it said it would borrow, according to several bond market participants who attended a meeting with the RBI earlier this month.
According to data on the RBI’s Negotiated Dealing System-Order Matching platform, market-wide turnover was 304.15 bln rupees at 1530 IST, compared with 173.85 bln rupees at 1530 IST on Tuesday.
For the rest of the day, yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.30-7.38%. (Nishat Anjum)
India Gilts: Remain up as US ylds fall; mkt lacks firm domestic cues
MUMBAI–1230 IST–Government bond prices remained up tracking a fall in US Treasury yields, dealers said. However, after the initial rise in gilt prices, traders avoided aggressive bets due to lack of significant domestic cues.
The yield on the benchmark US Treasury note fell to 3.48% on Wednesday from 3.59% on Tuesday due to expectations that the key policy rate may peak out soon, after the US Federal Reserve delivered a 25-basis point rate hike on Wednesday.
“Market would be looking at the 7.30% yield (on the benchmark 2032 bond) as the key technical level for the day,” a dealer at a private bank said. “That level would be hard to break as we are near financial year-end and the new auction calendar could also be heavy.”
On the domestic front, the rate-hike expectation from the Reserve Bank of India’s Monetary Policy Committee remained unchanged. Most traders expect the repo rate to top out at 6.75% after a final hike of 25 bps in April, dealers said.
Moreover, with the new financial year starting April, traders expect a large gilt supply, keeping the gains limited on domestic bond prices, dealers said. The government is expected to raise 8.49 trln rupees in the first half of the next financial year, slightly higher than 8.45 trln rupees it said it would borrow, according to several bond market participants who attended a meeting with the RBI earlier this month.
The yields on short-term domestic bonds fell more compared to bonds with tenures of 10 years and above, same as in the case of US Treasury bonds, dealers said. Yields on 7.38%, 2027 bond and 7.10%, 2029 bond fell 5 bps each from Tuesday’s close, to 7.17% and 7.27%, respectively. But yield on the benchmark 2-year US Treasury note fell 21 bps to 3.96% from Tuesday’s close.
According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the market-wide turnover was 172.35 bln rupees at 1220 IST, compared with 68.70 bln rupees at 1230 IST on Tuesday.
For the rest of the day, yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.30-7.38%. (Nishat Anjum)
India Gilts: Rise on fall in US ylds; traders avoid aggressive bets
MUMBAI–1005 IST–Prices of government bonds surged tracking a fall in US Treasury yields, dealers said. US Treasury yields fell due to expectations that the key policy rate may peak out soon, after the US Federal Reserve delivered a 25-basis point rate hike on Wednesday. Traders avoided aggressive bets due to lack of significant cues in the domestic market, dealers said.
“The yields today may remain in a range of 7.30-7.36%. No one would like to take much of long or short bets as we are nearing the end of the financial year,” a dealer at a private bank said.
The yield on the benchmark 10-year US Treasury note fell to 3.48% on Wednesday from 3.55% at the end of Indian market hours on Tuesday. The yield was further down by 4 basis points to 3.44% in early Asian trade. A fall in US Treasury yields widens the interest rate differential between the safe-haven asset and emerging market debt, making the latter more appealing to foreign investors.
The US Federal Open Market Committee raised the federal funds target range by 25 bps for the second straight meeting to 4.75-5.00%, opting to keep up its monetary policy tightening despite the much-publicised bank failures in the world’s largest economy. Powell said the FOMC did consider a pause in the March policy review, but unanimously decided to act otherwise, taking the strength of the labour market and CPI numbers into account.
Moreover, Fed Chair Jerome Powell said that the Fed will do “enough” to bring inflation down to 2%, and that it will raise rates higher if it needs to, in his post policy press conference.
Back home, the rate-hike expectation from the domestic rate-setting panel remained unchanged. Most traders expect the repo rate to top out at 6.75% after a final hike of 25 bp in April, dealers said.
Prices may move within a narrow range during the day after a sharp rise in early trade as traders expect a large gilt supply in the new financial year starting Apr 1. The government is expected to raise 8.49 trln rupees in the first half of the next financial year, slightly higher than 8.45 trln rupees it said it would borrow, according to several bond market participants who attended a meeting with the Reserve Bank of India, early March.
According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the market-wide turnover was 79.35 bln rupees at 1005 IST, compared with 15.65 bln rupees at 0945 IST on Tuesday.
During the day, yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.30-7.38%. (Kasthuri Akhil)
India Gilts:Seen up as US ylds fall after Fed hikes rates, hints pause
MUMBAI – Prices of government bonds are seen opening slightly higher, tracking a fall in US Treasury yields on Wednesday, dealers said. US Treasury yields fell on expectations that the key policy rate might be peaking after the Federal Reserve announced a 25-basis-point rate hike, and refrained from giving any forward guidance. However, the central bank hinted that it may consider pausing rate hikes in the future in view of the recent upheaval in the banking system.
Today, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.30-7.38% as against 7.35% on Tuesday. Money markets were closed on Wednesday on account of Gudi Padwa.
The US Federal Open Market Committee’s widely-expected 25-bps rate hike has taken the Fed funds rate to a range of 4.75-5.00%.
On Wednesday, the yield on the benchmark 10-year US Treasury note fell 7 basis points to 3.48% from 3.55% at the end of Indian market hours on Tuesday. A fall in US Treasury yields widens the interest rate differential between the safe-haven asset and emerging market debt, making the latter more appealing to foreign investors.
However, Fed Chairman Jerome Powell restated his commitment to curb inflation in a post-policy press conference. Powell said that the Fed will do “enough” to bring inflation down to 2%, and that it will raise rates higher if it needs to.
Back home, traders expect the Monetary Policy Committee to hike the repo rate by 25 bps in April, taking the repo rate to 6.75%, dealers said. Traders also believe the Reserve Bank of India may not hike the repo rate beyond 6.75% after the US Federal Reserve has hinted at a pause going forward, dealers said. (Kasthuri Akhil)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Aditya Sakorkar
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