Informist, Tuesday, May 23, 2023
By Anjali
NEW DELHI – Government bonds ended sharply down today tracking a rise in overnight indexed swap rates, dealers said. The overnight rise in US Treasury yields further weighed on gilts.
The 10-year benchmark 7.26%, 2033 bond ended at 101.69 rupees or 7.01% yield, against 101.89 rupees, or 6.99% yield on Monday.
“In the shorter end, the sell-off was due to rise in OIS (overnight index swap) rates,” a dealer at a primary dealership said. “However, the longer end fell after some big investors booked profit in those segments.” Some dealers speculated that foreign banks sold their bond holdings at a profit.
Swap rates rose as offshore traders paid fixed rates on worries over US debt ceiling crisis. The five-year swap rate rose by 9 basis points to 6.04% from Monday’s close, while the one-year swap rate rose 6 bps to 6.58%.
If the US fails to raise its borrowing limit before the first week of June, the world’s largest economy is likely to run out of money and default on its payment obligation. This will have devastating effects across all financial markets worldwide.
For the large part of the day, traders tracked the overnight rise in US Treasury yields, dealers said. The yield on the 10-year benchmark 2033 bond remained below the psychologically-crucial mark of 7.00% in the early trade as traders considered it to be a lucrative level to step up purchases of the 10-year paper, dealers said.
“There was resistance at 7% in morning,” a dealer at a private bank said. “The paying in OIS spilt in gilts, but before that 10-year (7.26%,2033 bond) was well settled below 7%, now the yield should not rise any more from here.”
The yield on the benchmark 10-year US Treasury note rose to 3.72% on Monday from 3.70% on Friday. 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.
Meanwhile, investors also hoped that the US may soon resolve the debt ceiling issue and reach an agreement after House of Representative Speaker Kevin McCarthy termed his meeting with President Joe Biden as “productive” and “professional”.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform, the turnover was 422.90 bln rupees compared with 496.35 bln rupees on Monday. No trade was settled with the digital rupee today.
OUTLOOK
On Wednesday, bonds are seen opening steady on lack of significant domestic cues, dealers said.
Traders keenly await the US Federal Open Market Committee meeting minutes, scheduled to be released later in the day.
Fed meeting minutes may give the market insight into rate trajectory of the world’s largest economy.
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 6.95-7.05%.
India Gilts: Remain down tracking rise in swap rates
MUMBAI–1500 IST—-Prices of government bonds remained down tracking a rise in overnight indexed swap rates. An overnight rise in US Treasury yields also weighed on prices, dealers said.
“Swap rates were already up because of US yields, but later it rose due to offshore paying that triggered some sell-off in the shorter-term bonds,” a dealer at a private bank said. “Tracking that, the 10-year (7.26%, 2033) paper also got sold off.”
The five-year swap rate was up 9 basis points at 6.04% from Monday’s close, while the one-year swap rate was up 6 bps at 6.58%.
US Treasury yields rose on Monday as investors shifted focus to negotiations about raising the US government’s borrowing limit. The yield on the benchmark 10-year US Treasury note rose to 3.72% on Monday from 3.70% on Friday.
Traders avoided aggressive bets in the domestic bond market in a bid to gauge liquidity conditions over a period of time, now that the process of exchanging or depositing 2,000-rupee banknotes has already begun, dealers said.
Starting today, these notes can either be exchanged or deposited at bank branches or the RBI’s 19 regional offices, the central bank said.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was 299.65 bln rupees at 1500 IST as compared with 429.10 bln rupees at 1535 IST on Monday.
For the rest of the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.98-7.03%. (Kasthuri Akhil)
India Gilts: Remain dn; US ylds rise, volume low on lack of firm cues
NEW DELHI–1200 IST–Government bonds remained down tracking an overnight rise in US Treasury yields, dealers said. Traders avoided placing large bets due to lack of significant domestic cues, which kept the volume muted.
Meanwhile, traders see a firm demand at state government securities auction, dealers said. “Demand will equally be there across all maturities because of good buying levels. Particularly, there should be demand for shorter-term bonds due to rising liquidity,” a dealer at a private bank said. “Insurance companies may still be present for the longer-term bonds.”
Dealers speculated that primary dealers and state-owned banks bid aggressively for 5-year, and 7-year bonds. Moreover, insurance companies stocked up on the longer-tenure bonds, dealers said.
Andhra Pradesh, Assam, Haryana, Jammu and Kashmir, Kerala, Maharashtra, Nagaland, Rajasthan, Tamil Nadu, and Uttar Pradesh are the 10 states that plan to raise 180.50 bln rupees through the sale of bonds.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was 135.40 bln rupees at 1200 IST compared with 303.70 bln rupees at 1210 IST on Monday.
For the rest of the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.97-7.02%. (Anjali)
India Gilts: Down tracking rise in US yields; volume muted
MUMBAI–0925 IST–Prices of government bonds were down tracking an overnight rise in US Treasury yields, dealers said. Moreover, traders avoided placing large bets due to the lack of firm domestic cues, keeping trade volumes low.
The yield on the 10-year benchmark 2033 bond remained below the psychologically-crucial mark of 7% as traders considered it to be a lucrative level to step up purchases of the 10-year paper, dealers said.
“Yesterday (Monday), the bonds rallied as they thought liquidity would improve after the withdrawal of 2,000-rupee banknotes. But now it looks like everybody is cautious to see how much liquidity is actually coming back to the system,” a dealer at a state-owned bank said.
On Friday, the RBI said it would withdraw the highest denomination banknotes of 2,000 rupees from circulation by Sep 30. By the end of September, the market expects banking system liquidity to increase gradually by 500 bln to 1.5 trln rupees.
After a sharp rise in the previous trading session, government bonds may move in a narrow range for the rest of the day, dealers said.
The yield on the benchmark 10-year US Treasury note rose to 3.72% on Monday from 3.70% on Friday. 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 on Monday as investors shifted their focus to US debt ceiling negotiations. If the US fails to raise its borrowing limit before the first week of June, it is likely to run out of money and default on its payment obligation. This will have a devastating effect on financial markets worldwide.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was 32.05 bln rupees at 0925 IST compared with 111.45 bln rupees at 0930 IST on Monday.
During the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.97-7.02%. (Nishat Anjum)
India Gilts: Seen tad up as positive sentiment from Mon may linger
MUMBAI – Prices of government bonds are seen opening slightly higher as the positive sentiment from Monday may linger. Shorter-term bonds may rise more as traders are expected to step up purchases of these bonds due to expectations of easing liquidity, with the Reserve Bank of India withdrawing 2,000-rupee banknotes from circulation gradually by Sep 30, dealers said.
Today, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.95-7.00%, against 6.99% on Monday. The yield on the 10-year benchmark 2033 bond may remain below the psychologically crucial 7% mark as traders consider it to be a lucrative level to step up purchases of the 10-year paper, dealers said.
However, prices may move within a narrow range during the day as traders may sell their bond holdings at a profit, limiting the rise in prices, dealers said.
As was the case on Monday, domestic factors may continue to take precedence over the impact of overseas cues in the domestic market, dealers said.
US Treasury yields rose on Monday as investors shifted focus to negotiations about raising the US government’s borrowing limit. If the US fails to raise its borrowing limit before the first week of June, it is likely to run out of money and default on its payment obligation. This will have a devastating effect across financial markets worldwide.
The yield on the benchmark 10-year US Treasury note rose to 3.72% Monday from 3.70% on Friday.
Meanwhile, market participants remained unsure about the US Federal Reserve’s monetary policy path going forward, amid growing uncertainties in the world’s largest economy.
Back home, traders expect the positive momentum for gilts to continue, dealers said. They expect easing liquidity to bolster credit growth by means of softening overnight rates, which will give room to the central bank to delay rate cuts by few months, dealers said.
Now, the market expects the Monetary Policy Committee to cut rates by the end of the current financial year as against last week’s expectations of rate cuts by as early as October. (Kasthuri Akhil)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Akul Nishant Akhoury
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