Informist, Wednesday, May 24, 2023
By Kasthuri Akhil
MUMBAI – Prices of government bonds ended higher. A large corporate entity was speculated to have stepped up purchases, causing the prices of long-term bonds to surge, dealers said.
The 10-year benchmark 7.26%, 2033 bond ended at 101.85 rupees, or 6.99%, against 101.69 rupees, or 7.01%, yield on Tuesday.
“There have been speculations that there were two corporates in the market today,” a dealer at another state-owned bank said. “This movement isn’t really backed by fundamentals, that’s why demand is in duration (10- and 14-years bonds).”
Dealers speculated that besides corporate entities, primary dealerships, too, led to the rise in prices as they covered their short bets on the 10-year benchmark 2033 paper.
Some traders likely covered their short bets that they placed when the price of the 2033 paper rose briefly following the comment by the Reserve Bank of India Governor Shaktikanta Das that the decision to keep the repo rate and policy stance unchanged at the April policy review should be taken as a “pivot, not a pause”, at an event today, dealers said.
However, gilts gave up all the gains soon after traders realised that Das’s comment was a mistake. The central bank, too, clarified that the governor misspoke.
However, yield on the 10-year benchmark 2033 bond remained above 6.98% as some traders sold their bond holdings at a profit in the latter half of the day, dealers said.
Rise in prices of short-term bonds was limited as traders had already factored in the positives of the RBI announcement on 2,000-rupee banknote withdrawal and expected only fresh cues to drive any price movement in that segment, dealers said.
“In the short-term bonds, the market is still hesitant about the liquidity conditions. They thought there would be more liquidity flow after 2,000 banknotes withdrawal, but it doesn’t look like right now,” a dealer at a primary dealership said. “On top of that, there is no clarity in rate cuts.”
Meanwhile, a fall in US Treasury yields also aided the rise in prices, dealers said. US Treasury yields fell as the US debt ceiling negotiations remained unresolved after another round of talks on Tuesday, which weighed on investor sentiment.
The yield on the benchmark 10-year US Treasury note fell to 3.67% towards the end of Indian market hours from 3.73% during the day. 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.
Domestic traders keenly await the US Federal Open Market Committee minutes of May meeting, scheduled to be released later today. Fed meeting minutes may give the market an insight into the rate trajectory of the world’s largest economy.
According to the CME FedWatch tool, about 67% of Fed fund futures traders expect the Federal Reserve to keep rates unchanged. The rest see a 25-basis-point hike in June.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform, the turnover was 527.30 bln rupees compared with 422.90 bln rupees on Tuesday. Trades aggregating 200 mln rupees were settled in two deals with the digital rupee today.
OUTLOOK
On Thursday, bonds are seen opening steady on lack of significant domestic cues. However, bonds are also likely to take cues from the FOMC meeting minutes, due for release later today, dealers said.
Traders may 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 6.95-7.03%.
India Gilts: Rise; traders cover short bets on longer-term papers
MUMBAI–1425 IST—-Prices of government bonds rose tracking a slight fall in US Treasury yields during the day. Longer-term papers were sharply up as traders covered their short bets, dealers said.
“Primary dealerships shorted yesterday (Tuesday) and today as well when prices rose after Das’ speech, so they are covering now,” a dealer at a state-owned bank said. “However, 6.98% (yield on 10-year benchmark 7.26%, 2033 bond) would be a key resistance level.”
Prices rose briefly after Reserve Bank of India Governor Shaktikanta Das misspoke at an event today while referring to his earlier statement at the April policy review. However, gilts soon erased gains as the market realised that it was an error of speech, which was later clarified by the central bank too.
Dealers speculated that besides short-covering by primary dealerships, prices rose as corporate entities stepped up purchases of the longer-tenure bonds.
However, yield on the 10-year benchmark 2033 bond is expected to not fall below 6.98% as traders may sell their bond holdings to seek profits following the rise in prices, dealers said.
Meanwhile, the yield on the benchmark 10-year US Treasury note fell to 3.69% from 3.72% during the day. US Treasury yields fell amid growing uncertainty around the US debt ceiling issue.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was 405.45 bln rupees at 1425 IST as compared with 284.45 bln rupees at 1450 IST on Tuesday.
For the rest of the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.97-7.02%. (Kasthuri Akhil)
India Gilts: In thin band on lack of firm domestic cues
MUMBAI–1230 IST–Prices of government bonds were in a thin band as traders avoided placing aggressive bets due to the lack of firm domestic cues, dealers said.
“I think the governor spoke wrongly but then immediately people started to buy and the market rose. Later when they made sense of the comment, prices again came back to the original levels,” a dealer at a state-owned bank said.
Prices rose briefly following Reserve Bank of India Governor Shaktikanta Das’ comments at an event that the Monetary Policy Committee’s decision to keep the repo rate and policy stance unchanged at the April policy review should be taken as a “pivot, not a pause”. In the monetary policy statement in April, Das had said the pause was for that meeting only, not for future meetings.
Gilts soon gave up all the gains as traders perceived Das’ comment today to be a speech error, dealers said. The central bank, too, clarified that Das misspoke.
Meanwhile, a rise in US Treasury yields weighed on domestic gilt prices, dealers said. The yield on the benchmark 10-year US Treasury note rose to 3.72% from 3.69% in early trade. US Treasury yields rose amid growing uncertainty around the US debt ceiling issue.
Traders in the domestic market are now looking forward to the US Federal Open Market Committee’s May meeting minutes, scheduled after market hours today, to gauge the rate trajectory in the world’s largest economy, dealers said.
According to the CME FedWatch tool, about 64% of Fed fund futures traders expect the Federal Reserve to keep rates unchanged. The rest see a 25-basis-point hike in June.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was 231.45 at 1230 IST compared with 135.40 bln rupees at 1200 IST on Tuesday.
For the rest of the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.97-7.04%. (Kasthuri Akhil)
India Gilts: Tad up tracking fall is US yields; volume muted
MUMBAI–0917 IST–Prices of government bonds were tad up, tracking a fall in US Treasury yields, dealers said. However, traders avoided placing large bets on lack of firm domestic cues, keeping the trade volume low.
“The market looks like has stopped around 7% (on the 10-year, 7.26%, 2033 bond). To move anywhere from here would need some strong cues,” a dealer at a state-owned bank said. “Maybe in the second half when US Treasury moves, then we will also have some movement.”
Traders refrained from placing aggressive bets as the gridlock over raising the US debt ceiling continues, dealers said. Talks between representatives of the US President Joe Biden and House Representative Speaker Kevin McCarthy on Tuesday failed to give a concrete decision on raising the US government’s borrowing limit.
The US is nearing Jun 1, when it has to fulfil its payment obligation otherwise the world’s largest economy is likely to default, plummeting financial markets across the globe.
The market awaits the minutes of the US Federal Open Market Committee meeting, scheduled to be released after market hours, to gauge the rate trajectory in the world’s largest economy, dealers said.
According to the CME FedWatch tool, about 71% of Fed fund futures traders are expecting the US Federal Reserve to keep the rates unchanged, while the rest see a 25-basis-point hike in June.
Yield on the benchmark 10-year US Treasury note fell to 3.69% in early trade as compared to 3.74% at the time of Indian market close 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 the RBI’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was 16.45 bln rupees at 0916 IST compared with 37.05 bln rupees at 0930 IST on Tuesday.
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 steady on lack of firm cues, US Fed minutes eyed
NEW DELHI – Prices of government bonds are seen opening steady today as traders might refrain from placing large bets due to the lack of significant domestic cues, dealers said. Traders might also exercise caution ahead of the US Federal Open Market Committee’s meeting minutes, scheduled to be released later today.
Today, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.95-7.05% as against 7.01% on Tuesday.
The slight fall in US Treasury yields might keep gilts afloat today, dealers said. The yield on the benchmark 10-year-US Treasury note fell slightly on Tuesday as debt ceiling negotiations remained unresolved after another round of talks, which weighed on the investor sentiment.
The yield on the benchmark 10-year US Treasury note fell 2 basis points to 3.70% on Tuesday.
Meanwhile, the market remained unsure about the US Federal Reserve’s monetary policy path going ahead as the central bank’s officials gave mixed signals.
Federal Reserve Bank of St. Louis President James Bullard said on Monday that the central bank needs to raise the interest rate another two times to tame stubborn inflation. “I think we’re going to have to grind higher with the policy rate in order to put downward pressure on inflation,” Bullard said, speaking at an event in Florida.
On the other hand, Minneapolis Fed President Neel Kashkari said he could support holding interest rates steady at the central bank’s next meeting in June, but added that the Fed should signal that it’s not done raising rates yet.
Bullard and Kashkari’s comments came after Federal Reserve Chairman Jerome Powell said on Friday that turmoil in the banking system could mean the central bank won’t have to raise interest rates as much to tame inflation.
According to the CME FedWatch tool, about 68% of Fed fund futures traders expect the Federal Reserve to keep rates unchanged. The rest see a 25-basis-point hike in June. (Anjali)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Deepshikha Bhardwaj
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