Informist, Thursday, May 25, 2023
By Kasthuri Akhil
MUMBAI – Prices of government bonds ended lower tracking a rise in US Treasury yields. Some traders also placed short bets to make space for fresh debt supply ahead of the 310-bln-rupee auction on Friday, dealers said.
The 10-year benchmark 7.26%, 2033 bond ended at 101.75 rupees, or 7.01% yield, against 101.85 rupees, or 6.99% yield on Wednesday.
“People did not place a lot of short bets because volumes are very low, there’s also no major cue in the market,” a dealer at a primary dealership said. “People are also divided about rate cuts or liquidity, so nobody really wants to place any bets now.”
At the auction on Friday, the government will sell 70 bln rupees of the 7.17%, 2030 bond, 120 bln rupees of the 7.41%, 2036 bond, and 120 bln rupees of the 7.40%, 2062 bond.
Dealers speculated foreign banks, who were the largest net buyers of bonds on Wednesday, sold their holdings at a profit today, which also weighed on prices of longer-term bonds.
However, losses were restricted due to persistent demand for the 10-year benchmark 2033 bond at yield levels near 7.00%, dealers said. State-owned banks were speculated to have stepped up purchases of the longer-term bonds today.
Largely, domestic gilts tracked US Treasury yields throughout the day after making their way through a week of speculations and anticipations with regard to liquidity conditions. Traders expected prices to move within a narrow range unless anything significantly new happens in the domestic market, dealers said.
“There was just moderate activity in the market today. There is no new trajectory that the market is following right now,” a dealer at a private bank said. “After opening around 2 basis points up, the bond market had been resilient. There was buying momentum at 7.00% (on the 7.26%, 2033 bond).”
The yield on the benchmark 10-year US Treasury note rose to 3.77% during the day from 3.67% at the end of Indian market hours on Wednesday. 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.
Amid the debt crisis anxiety and commentary from the Fed officials, US Treasury yields reached its highest levels since Mar 10.
US treasury yields rose as the standoff over US debt ceiling negotiations continued even when the world’s largest economy is just eight days away from defaulting on its payment obligation. Credit rating company Fitch, too, put the US’ AAA rating on negative watch in a precursor to a possible downgrade, should the US government default, which could happen as soon as next week.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform, the turnover was 324.90 bln rupees compared with 527.30 bln rupees on Wednesday. Meanwhile, trades aggregating 300 mln rupees were settled in four deals with the digital rupee today, as against 200 mln rupees settled in two deals on Wednesday.
OUTLOOK
On Friday, bonds are seen opening steady as traders may stay on sidelines ahead of the 310-bln-rupee gilt auction on Friday, 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 6.97-7.05%.
India Gilts: Remain down; US yields rise, traders sell before auction
NEW DELHI – Government bonds prices remained down, tracking an overnight rise in US Treasury yields. However, the losses were limited as some traders stepped up purchases of the 10-year benchmark 7.26%, 2033 paper at yield levels near 7%, considered lucrative, dealers said.
“Every time the yield (on 10-year paper) goes beyond 7% level, there will be demand,” a dealer at a state-owned bank said. “But, today the market is quite steady, I see it closing at 7.01-7.02% level (yield on the 10-year paper).”
Dealers speculated that state-owned banks stocked up on gilts, whereas foreign banks sold their bond holdings at a profit.
Some dealers sold the 7.41%, 2036 bond at a profit to make space ahead of a 310-bln-rupee gilt auction on Friday, dealers said. The central government will sell 70 bln rupees of the 7.17%, 2030 bond, 120 bln rupees of the 7.41%, 2036 bond, and 120 bln rupees of the 7.40%, 2062 bond.
Prices moved in a narrow range after the fall in early trade as the market lacked significant domestic cues because all factors, including the uncertainty around liquidity, have already been priced in, in the last few trading sessions, dealers said.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was 246.90 bln rupees as of 1445 IST, compared with 405.45 at 14500 IST on Wednesday.
For the rest of the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.98-7.02%. (Anjali)
India Gilts: Dn; traders buy 7.26% 2033 bond at 7% yld, limit losses
MUMBAI–1220 IST–Prices of government bonds remained down, tracking an overnight rise in US Treasury yields. However, losses were limited as some traders stepped up purchases of the 10-year benchmark 7.26%, 2033 paper at yield levels near 7%, considered lucrative, dealers said.
“Today too, there is some corporate buying at these levels just like yesterday (Wednesday),” a dealer at a private bank said. “There are also some short bets on the 14-year (7.41%, 2036) paper but not much, that is why prices are pretty range-bound.”
Some traders placed short bets to make space for the fresh debt supply at the 310-bln-rupee auction on Friday, which also weighed on prices. However, prices moved within a narrow range as traders refrained from placing aggressive bets due to lack of firm cues in the domestic market, dealers said.
At the auction on Friday, the government will sell 70 bln rupees of the 7.17%, 2030 bond, 120 bln rupees of the 7.41%, 2036 bond, and 120 bln rupees of the 7.40%, 2062 bond.
Meanwhile, an overnight rise in US Treasury yields continued to weigh on domestic gilt prices. Traders tracked overseas cues as all speculation on liquidity conditions had already been factored in by the market over the last few days, dealers said.
The yield on the benchmark 10-year US Treasury note rose to 3.75% from 3.67% at the end of Indian market hours on Wednesday. US treasury yields rose as the US debt ceiling standoff continued even as the deadline looms near.
Credit rating company Fitch put the US’ AAA rating on negative watch in a precursor to a possible downgrade, should the world’s largest economy default on its payment obligation, which could happen as soon as next week.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was 143.95 bln rupees as of 1215 IST, compared with 231.45 at 1230 IST on Wednesday.
For the rest of the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.98-7.02%. (Kasthuri Akhil)
India Gilts: Dn as US yields rise; traders make space for Fri auction
MUMBAI–0931 IST–Prices of government bonds fell tracking an overnight rise in US Treasury yields, dealers said. Traders also made space for fresh supply from the 310-bln-rupee gilt auction, scheduled on Friday.
“After a week of speculations and anticipations, the market has come back to tracking fundamentals,” a dealer at a state-owned bank said. “Some have started making space for the auction, and others are tracking US Treasury yields.”
On Wednesday, dealers had speculated that a large corporate entity had stepped up purchases, causing a surge in the prices of long-term bonds.
According to dealers, the market believes the US will probably not default on its payment obligations, but the fact that no consensus has been reached yet in the ongoing debt ceiling negotiations weighed on bonds.
US treasury yields rose on Wednesday as the impasse over debt ceiling negotiations continued even as the deadline looms nearer. If the US defaults on its payment obligations, it would have a catastrophic effect on financial markets across the world.
The yield on the benchmark 10-year US Treasury note rose to 3.75% as against 3.67% at the end of Indian market hours on Wednesday.
On the domestic front, the government will sell 70 bln rupees of the 7.17%, 2030 bond, 120 bln rupees of the 7.41%, 2036 bond, and 120 bln rupees of the 7.40%, 2062 bond, on Friday. A lack of significant domestic cues may keep the bonds in a narrow range for the rest of the trading session today, dealers said.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was 48.30 bln rupees at 0930 IST compared with 19.00 bln rupees at 0930 IST on Wednesday.
During the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.98-7.02%. (Nishat Anjum)
India Gilts: Seen down; US yields rise, traders eye fresh gilt supply
NEW DELHI – Prices of government bonds are seen opening lower today tracking an overnight rise in US Treasury yields, dealers said.
Traders may place short bets ahead of the 310-bln-rupee gilt auction on Friday.
The central government will sell 70 bln rupees of the 7.17%, 2030 bond, 120 bln rupees of the 7.41%, 2036 bond, and 120 bln rupees of the 7.40%, 2062 bond.
Today, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.95-7.05% as against 6.99% on Wednesday.
US treasury yields rose on Wednesday as the impasse over US debt ceiling negotiations continued even when the world’s largest economy is just eight days away from defaulting on its payment obligation, which could cause catastrophic effects on financial markets across the world. This weighed on investors’ risk sentiments.
Further, the minutes of the US Federal Reserve’s May 2-3 meeting showed the Fed officials agreed that there was “less certainty” about hiking the rates as aggressively as before. However, they agreed to remain vigilant as high inflation still persists. The minutes were read as divided, which created confusion about the US central bank’s policy path in the coming times.
According to CME FedWatch tool, Fed funds future market is factoring in a 35.3% likelihood of a 25-basis-point rate hike in the US Fed’s next policy review meeting on Jun 14, while the rest expects a pause.
The yield on the benchmark 10-year US Treasury note rose to 3.73%, against 3.67% at the end of Indian market hours on Wednesday. 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.
During the day, prices may move in a narrow range due to lack of significant domestic cues, dealers said. The volume may also remain muted for the large part of the day. (Anjali)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Akul Nishant Akhoury
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