Informist, Monday, May 8, 2023
By Anjali
NEW DELHI – Government bond prices fell today tracking a rise in US Treasury yields. Some traders sold the benchmark 10-year paper, and the 7.41%, 2036 paper at a profit, which further weighed on gilts, dealers said.
The 10-year benchmark 7.26%, 2033 bond ended at 101.46 rupees, or 7.05% yield, against 101.70 rupees, or 7.01% yield, on Thursday. Indian money markets were shut on Friday on account of Buddha Purnima.
“Those who carried their bets after the auction on Thursday, booked 15-20 paise profit today,” a dealer at a state-owned bank said. “There was rise in prices in the last hour on Thursday, it went up to 70 paise, nobody wanted to wait for it to fall further and booked profit.”
On Thursday, the Reserve Bank of India had set the cutoff on the benchmark 10-year paper at 101.53 rupees against the expectations of 101.70 rupees, according to an Informist poll.
Losses were limited in the shorter-tenure papers as traders were reluctant to sell their holdings to seek profits owing to limited trading volume in the secondary market. Moreover, traders expect the 7.06%, 2028 paper to overtake the status of the five-year benchmark after 1-2 auctions, which also kept volume of the 7.38%, 2027 paper low.
Traders expected the yield on the short-term papers to fall going forward. They refrained from stocking up on the five-year benchmark 7.38%, 2027 bond also due to lack of clarity on any rate cuts in the near future, dealers said.
US Treasury yields rose as investors reversed their bets on the Federal Reserve cutting rates as early as July after robust jobs data for April signalled that a recession or growth downturn was not evident. Perceived risks to financial market stability from the US regional banks also waned.
The yield on the benchmark 10-year US Treasury note rose to 3.47% by the end of the trade, against 3.37% on Thursday. 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.
For a large part of the day, the 10-year benchmark 7.26%, 2033 bond moved in a thin band after traders sold their holdings of the paper in the first half of the trading session, due to caution ahead of the release of key inflation data this week, dealers said.
“For a while, we see the yield on the 10-year paper in a narrow range. The overall market view is that yields will go down going ahead,” a dealer at a state-owned bank said. “We expect fresh add-ups after likely lower inflation in the US.”
Traders avoided placing aggressive bets due to caution ahead of the domestic inflation data release, due Friday, and the US CPI data on Wednesday, dealers said. Economists expect a rise of 0.4% in April for both the US headline and core CPI, with the annual pace of core inflation inching down to 5.5%, according to a poll by Reuters. In March, the headline inflation print rose 5% on year and core CPI rose 5.6%.
According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform, the turnover was 307.15 bln rupees, compared with 655.10 bln rupees on Thursday. Meanwhile, three trades aggregating 250 mln rupees were settled with the digital rupee today as compared to no trade on Thursday.
OUTLOOK
On Tuesday, bond prices are seen steady on lack of significant cues, dealers said.
Traders may also track overnight movement in US Treasury yields and crude oil prices.
The yield on the 10-year benchmark 7.26%, 2033 bond is seen at 7.00-7.09%.
India Gilts: Remain down; traders cautious ahead of US CPI data Wed
MUMBAI–1535 IST-—Prices of government bonds remained down tracking a rise in US Treasury yields, dealers said. The yield on the benchmark 10-year US Treasury note rose to 3.44% on Friday from 3.37% on Thursday.
Traders avoided aggressive bets awaiting US CPI inflation data for April, due for release on Wednesday, dealers said.
“Any reason for rally (in prices) is behind us. The market needs fresh cues as of now,” a dealer at a private bank said. “After the weekly auction cutoffs came in lower than expected last week, the market sentiment has been down since.”
On Thursday, the Reserve Bank of India had set the cutoff on the benchmark 10-year paper at 101.53 rupees against the expectations of 101.70 rupees, according to an Informist poll.
Losses were limited in the shorter-tenure papers as traders were reluctant to sell their holdings to seek profits owing to limited trading volume in the secondary market.
Traders expected the yield on the short-term papers to fall going forward. However, they refrained from stocking up on the five-year benchmark 7.38%, 2027 bond due to lack of clarity of any rate cuts in the near future, dealers said.
Meanwhile, the 10-year benchmark 7.26%, 2033 bond moved in a thin band after traders sold their holdings of the paper during the first half of the trading session, due to caution ahead of the release of key inflation data this week, dealers said.
According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was 230.05 bln rupees at 1535 IST compared with 445.00 bln rupees at 1530 IST on Thursday.
For the rest of the day, yield on the 10-year benchmark 7.26%, 2033 bond is seen at 7.01-7.04%. (Kasthuri Akhil)
India Gilts: Remain down; traders sell longer-term papers at profit
MUMBAI–1240 IST—-Prices of government bonds remained lower, tracking a rise in US Treasury yields. Traders maintained caution ahead of the US inflation print for April, due Wednesday, dealers said.
Some traders sold their bond holdings at a profit that weighed on prices, further pulling the benchmark 10- and 14-year bonds down from their respective day’s highs.
“The trading range for the 10-year paper (benchmark 7.26%, 2033 bond) will be 6.90-7.10% for a while,” a dealer at a private bank said. “Now, the upcoming inflation prints are expected to be the lowest, so there may be a (price) rally post that.”
However, losses on the shorter-term bonds remained limited after falling in early trade tracking rise in US Treasury yields. The yield on the benchmark 10-year US Treasury note rose to 3.44% on Friday from 3.37% on Thursday.
Traders await US CPI inflation data for April, due for release on Wednesday, dealers said. According to a poll by Reuters, both headline and core CPI prints are seen up by 0.4% in April, with the annual pace of core inflation inching down to 5.5%, In March, the headline inflation print rose 5% on year and core CPI rose 5.6%.
According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was 135.80 bln rupees at 1240 IST compared with 224.25 bln rupees at 1210 IST on Thursday.
For the rest of the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.99-7.05%. (Kasthuri Akhil)
India Gilts: Down; traders avoid aggressive bets ahead of US CPI
MUMBAI–0934 IST–Prices of government bonds fell today tracking a rise in US Treasury yields, dealers said. However, traders avoided placing aggressive bets due to caution ahead of the US CPI data due Wednesday.
“We have data lined up in this week, so the market will remain range bound till then,” a dealer at a state-owned bank said. “We have our (India) CPI data also lined up on Friday, I do not see much activity before that.”
For US CPI, economists see a rise of 0.4% in April for both the headline and core CPI, with the annual pace of core inflation inching down to 5.5%, according to a poll by Reuters. In March, the headline inflation print rose 5% on year and core CPI rose 5.6%.
Traders also avoided large bets due to lack of significant domestic cues, keeping the trade volumes low, dealers said. Amongst on-the-run gilts, the benchmark 10-year 2033 had most trades, and the 7.38%, 2027 bond had only 5 trades worth 750 mln rupees.
US Treasury yields rose as investors reversed their bets on the Federal Reserve cutting rates as early as July after robust jobs data for April signalled a recession or growth downturn was not evident. Perceived risks to financial market stability from the US regional banks also waned.
The yield on the benchmark 10-year US Treasury note rose to 3.44% on Friday from 3.37% on Thursday.
According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was 34.00 bln rupees at 0936 IST compared with 91.45 bln rupees at 0930 IST on Thursday.
During the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.98-7.04%. (Nishat Anjum)
India Gilts: Seen lower as US ylds rise post non-farm payroll data
MUMBAI – Prices of government bonds are seen opening lower tracking a rise in US Treasury yields, dealers said. US yields ended higher on Friday after employment data for April showed that the labour market remained tight.
Today, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 6.98-7.05% as against 7.01% on Thursday. Indian money markets were shut on Friday on account of Buddha Purnima.
The yield on the benchmark 10-year US Treasury note rose to 3.44% on Friday from 3.37% on Thursday. 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.
US Treasury yields rose as investors reversed their bets on the US Federal Reserve cutting rates as early as July after robust jobs data for April signalled a recession or growth downturn was not evident. Perceived risks to financial market stability from US regional banks also declined.
Data by the US Labor Department showed that non-farm payrolls rose by 253,000 in April as against a Dow Jones estimate of 180,000 jobs. The unemployment rate also declined to a near 54-year low of 3.4%. With the labour market still tight, investors were wary of betting on a quick pivot from monetary policy tightening by the US Federal Reserve.
Moreover, St. Louis Fed President James Bullard said a recession was not a base case and a soft landing for the economy was still possible, even as he batted for higher rates to cool down inflation in the US, which remains well above the Fed’s target of a long-term average of 2% annually.
Traders also look forward to the US CPI inflation data for April, which is due on Wednesday. Economists polled by Reuters see a rise of 0.4% in April for both the headline and core CPI, with the annual pace of core inflation inching down to 5.5%. In March, the headline inflation print rose 5% on year. Meanwhile, core CPI rose 5.6%. (Nishat Anjum)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Tanima Banerjee
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