Informist, Wednesday, Mar 29, 2023
By Anjali
NEW DELHI – Government bond prices rose after the Reserve Bank of India rejected bids for the 91-day Treasury bill for the first time since the auction on Feb 24, 2016. The fall in US Treasury yields during the day further aided gilts.
The 10-year benchmark 7.26%, 2032 bond ended at 99.79 rupees, or 7.29% yield, against the previous close of 99.56 rupees, or 7.32% yield. The 7.26%, 2033 bond ended at 99.82 rupees, or 7.28% yield, against the previous close of 99.62 rupees, or 7.31%.
“Mutual funds were not present as expected, and whatever banks were there, they were bidding at 7.28-30%,” a dealer at a state-owned bank said. “There was fear of yield curve inversion, so they cancelled it.”
The RBI had auctioned 90 bln rupees of the 91-day T-bill, 160 bln rupees of the 182-day and 140 bln rupees of the 364-day T-bill between 1030 IST and 1130 IST today.
At the end of the financial year, most market participants have their funds parked, which might have also led to higher bidding, dealers said. Mutual funds, the second-largest holders of Treasury bills, are facing redemption pressures from banks at the end of the financial year in March.
Meanwhile, US Treasury yields fell as investors remained cautiously optimistic that the recent banking turmoil has settled. The yield on the benchmark 10-year US Treasury note fell to 3.54%, from 3.57% at the end of Indian market hours on Tuesday. Additionally, the yield on the two-year US Treasury note fell to 4.04% during the day, from 4.11% on Tuesday.
Moreover, some dealers speculated that insurance companies stocked up on long-term bonds due to the announcement of a tax change linked to some of their products in the Union Budget for 2023-24 (Apr-Mar). From Apr 1, income from life insurance policies, other than unit-linked insurance plans, with a premium or aggregate premium exceeding 500,000 rupees a year will become taxable.
The speculation of increase in demand for the rupee before the annual closing on Friday further aided gilts, dealers said. Banks are likely to sell dollars on behalf of exporters who want to convert their dollar holdings accumulated over the quarter before closing their books for the current financial year.
“Day after tomorrow (Friday) is annual closing day, which might lead to demand in rupee, so the curve will go up from here,” a dealer at a state-owned bank said. ” It is anyway end of the year, only US yields are in sight right now.”
Prices fell in early trade as the policy-sensitive two-year US Treasury note rose above 4% to 4.11% for the first time since Mar 14, after Silicon Valley Bank collapsed on Mar 10. US Treasury yields rose as fear of a crisis in the banking sector eased after the announcement of the acquisition of Sillicon Valley Bank by First Citizens Bank. Additionally, Federal Reserve Governor Michael Barr on Monday said Silicon Valley Bank’s failure was a “textbook case of mismanagement”, and pointed out that the central bank would investigate its processes around risk testing and assessment.
On the domestic front, traders await the announcement of the borrowing calendar for Apr-Sep, likely this week, dealers said. 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 financial year, where it may opt to conduct 55-58% of gross bond issuances for 2023-24 in Apr-Sep.
Few also anticipated a slight increase in the bond issuance in Apr-Sep, nearly 60% of 15.43 trln rupees borrowing target for the upcoming financial year, which may increase selling pressure and push prices down, dealers said.
The uncertainty around rate view also continued. Market was divided on their expectations from the Monetary Policy Committee, when it meets on Apr 3, 5 and 6. Most expect the repo rate to peak at 6.75% after a final hike of 25 basis points in April, dealers said. However, some dealers said with each passing day, the number of people betting on a pause is increasing.
According to data on RBI’s Negotiated Dealing System-Order Matching platform, the turnover was 374.30 bln rupees, compared with 374.30 bln rupees on Tuesday. No trades were executed today with the digital rupee pilot.
OUTLOOK
Indian money markets are closed on Thursday on account of Ram Navami.
On Friday, bond prices are seen opening steady as traders may stay on the sidelines before the release of the Apr-Sep borrowing calendar, due to be announced this week.
Traders may 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 7.25-7.33%.
India Gilts: Rise as US yields fall; market lacks major domestic cues
NEW DELHI – Government bond prices rose today tracking a fall in US Treasury yields in the European market, dealers said. However, gains were limited as traders avoided placing large bets on lack of significant domestic cues.
US Treasury yields fell as investors remained cautiously optimistic that the recent banking turmoil has settled. The yield on the benchmark 10-year US Treasury note fell to 3.54% during the day, against 3.57% at the end of Indian market hours on Tuesday
Prices fell in early trade as the policy-sensitive two-year US Treasury note rose above 4% to 4.11% for the first time since Mar 14, after Silicon Valley Bank collapsed on Mar 10. The yield on the two-year US Treasury note fell 10 basis points to 4.01% during the day.
“There was some gap in opening because of rise in US yields,” a dealer at a state-owned bank said. “Now that the global yields are mellowing down, the domestic yields are also inching down.”
The speculation of increase in demand for rupee before the annual closing on Friday also aided gilts, dealers said. Banks are likely to sell dollars on behalf of exporters who want to convert their dollar holdings accumulated over the quarter before closing their books for the current financial year.
According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the market-wide turnover was 249.50 bln rupees at 1525 IST, compared with 301.30 bln rupees at 1545 IST on Tuesday.
For the rest of the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.29-7.37%. (Anjali)
India Gilts: In thin band on lack of significant domestic cues
NEW DELHI–1315 IST–Government bond prices were in a thin band as traders avoided placing large bets due to lack of significant domestic cues, dealers said.
A lot of uncertainty on the rate view kept traders on the sidelines.
The yield on the policy-sensitive two-year US Treasury note rose above 4% to 4.11% for the first time since Mar 14, after Silicon Valley Bank collapsed on Mar 10
US Treasury yields rose as fear of a crisis in the banking sector eased after the announcement of the acquisition of Silicon Valley Bank by First Citizens Bank. Additionally, Federal Reserve Governor Michael Barr on Monday said Silicon Valley Bank’s failure was a “textbook case of mismanagement”, and pointed out that the central bank would investigate its processes around risk testing and assessment.
“There is a lot of uncertainty today regarding the rate hike,” a dealer at a state-owned bank said. “Majority is looking at 25 bps hike, but caution will stay till Monetary policy Committee’s decision.”
Meanwhile, the cut-off on the 91-day T-bill is seen 44 basis points higher than at the last auction, at 7.18%, according to an Informist poll. Mutual funds, the second-largest holders of Treasury bills, are facing redemption pressures from banks at the end of the financial year in March.
“There is demand-supply mismatch in T-bills because there is only selling by Mutual funds,” a dealer at a private bank said. “If T-bills are moving up in secondary market, typically it will reflect on primary market.”
According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the market-wide turnover was 111.70 bln rupees at 1300 IST, compared with 120.50 bln rupees at 1250 IST on Tuesday.
For the rest of the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.29-7.37%. (Anjali)
India Gilts:Tad dn as US ylds rise, lack of significant domestic cues
NEW DELHI – Prices of government bonds were tad down, tracking a rise in US Treasury yields, dealers said. The yield on the policy-sensitive two-year US Treasury note rose above 4% to 4.11% for the first time since Mar 14, after Silicon Valley Bank collapsed on Mar 10.
US Treasury yields rose as fear of a crisis in the banking sector eased after the announcement of the acquisition of Sillicon Valley Bank by First Citizens Bank. Additionally, Federal Reserve Governor Michael Barr on Monday said Silicon Valley Bank’s failure was a “textbook case of mismanagement”, and pointed out that the central bank would investigate its processes around risk testing and assessment.
A rise in US Treasury yields narrows the interest rate differential between the safe-haven asset and emerging market debt, making the latter less appealing to foreign investors.
“Market is tracking US yields step by step,” a dealer at a state-owned bank said. “Even the calendar (borrowing calendar) is late, so its US Treasury for now.”
On the domestic front, traders await the announcement of the borrowing calendar for Apr-Sep, likely this week, dealers said. 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 financial year, where it may opt to conduct 55-58% of gross bond issuances for 2023-24 in Apr-Sep.
Few also anticipated a slight increase in the bond issuance in Apr-Sep, nearly 60% of 15.43 trln rupees borrowing target for the upcoming financial year, which may increase selling pressure and push prices further down, dealers said.
Meanwhile, the uncertainty around rate view continued. Market was divided on their expectations from the Monetary Policy Committee, when it meets on Apr 3, 5 and 6. Most expect the repo rate to peak at 6.75% after a final hike of 25 basis points in April, dealers said. However, some dealers said with each passing day, the number of people betting on a pause is increasing.
According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the market-wide turnover was 23.00 bln rupees at 0945 IST, compared with 24.35 bln rupees at 0950 IST on Tuesday.
During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.29-7.37%. (Anjali)
India Gilts: Seen steady on lack of significant domestic cues
NEW DELHI – Government bond prices are seen opening steady due to lack of significant domestic cues, dealers said. However, inflows into insurance companies and debt mutual funds due to new tax norms coming into effect on Apr 1 may lead to buying in longer tenures, as has been the case for the past few trading sessions, dealers said.
Today, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.28-7.36%, as against 7.32% on Tuesday.
During the day, domestic bonds are expected to track US Treasury yields, dealers said. The yield on the benchmark 10-year US Treasury note remained steady at 3.58% in Asian trade today, against 3.57% at the end of Indian market hours on Tuesday. However, the yield on the policy-sensitive two-year US Treasury note rose above 4% for the first time since Mar 14, after Silicon Valley Bank collapsed on Mar 10.
Back home, the market is cautious ahead of the announcement of the borrowing calendar for Apr-Sep, likely this week. The government is expected to raise 55-58% of its record 15.43-trln-rupee gross borrowing programme in the first half of 2023-24 (Apr-Mar), dealers said. A figure closer to 60%, as in previous years, would dent sentiment and push gilt prices down.
Meanwhile, traders are divided on their expectations from the Monetary Policy Committee when it meets on Apr 3, 5 and 6. Most expect the rate-setting panel to go for a 25-basis-point rate hike. They also expect the repo rate to peak 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 increasing. (Anjali)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Maheswaran Parameswaran
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