Informist, Wednesday, May 31, 2023
By Nishat Anjum
MUMBAI – Prices of government bonds ended higher today, tracking a fall in US Treasury yields and crude oil prices, dealers said. Traders stepped up purchases of shorter-tenure gilts on the back of improved liquidity in the banking system.
The 10-year benchmark 7.26%, 2033 bond ended at 101.88 rupees, or 6.99% yield, against 101.72 rupees, or 7.01% yield on Tuesday.
Prices moved within a narrow range after rising in early trade as traders lacked fresh cues in the domestic market. They also looked forward to data on India’s GDP growth in Jan-Mar and 2022-23 (Apr-Mar).
“Morning opened positive, but after that prices were range-bound as traders waited for fresh cues before going long,” a dealer at a private bank said. “Any drastic change in the GDP data could cause gilt yields to move 3-4 basis points on either side of the current yield level.”
India’s GDP growth was expected to have risen to 5.1% in Jan-Mar from 4.4% the previous quarter, mainly due to buoyancy in services activity and an uptick in private consumption, according to a poll of 21 economists by Informist
Favourable GDP data is expected to affirm traders’ bets of the pause in repo rate continuing. Moreover, domestic inflation is also expected to further fall in May from the previous month, making a case against monetary policy tightening in the forthcoming meetings.
India’s headline inflation fell to an 18-month low of 4.70% in April from 5.66% in March. April was the first month since November 2021 when CPI inflation fell below the 5% mark.
Dealers said the gains in the short-term gilts was due to recent improvement in liquidity in the banking system. The liquidity surplus improved due to deposits received from 2,000-rupee banknotes. Moreover, month-end spending by the government in the form of salaries and pension payouts aided.
Liquidity in the banking system is currently estimated to be in a surplus of 1.35 trln rupees, up from 1.04 trln rupees on Tuesday.
Morover, in early trade, dealers had speculated that a corporate entity had stepped up purchases of short-term gilts to protect its underlying liability and interest payout for its recent debt issuance.
During the day, the gilts largely followed global cues, which has been the case for last few trading sessions as well, dealers said. A fall in US yields and crude oil prices kept the gilt prices afloat throughout the day.
“If there was a corporate buying then, in my opinion, the market would have moved much sharply up,” a dealer at a state-owned bank said. “I think today’s gains was largely due to fall in US yields and crude oil prices.”
The yield on the benchmark 10-year US Treasury note fell to 3.68% in early Asian trade from 3.72% at the end of Indian market hours 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.
US Treasury yields fell amid uncertainty over the passage of the bipartisan US debt ceiling deal in the Congress. The deal has to be passed before Jun 5, or the country will not be able to meet its financial obligations, the US Treasury Department has said.
The market will also keep a close watch on a series of key economic data in the US, due later this week, for clarity on the rate trajectory in the world’s largest economy, dealers said. Data on job openings and a labour turnover survey for April are due for release today, followed by the jobs report for May, due on Friday.
According to the CME FedWatch tool, about 64% of Fed fund futures traders–up from 33% last week–now expect the US Federal Reserve to hike rates by 25 basis points in June, while the rest see the rates unchanged.
Meanwhile, crude oil fell around 4% on Tuesday, ahead of a meeting of the Organization of the Petroleum Exporting Countries and its allies, including Russia, on Saturday. Investors are unsure if the group will cut supply further. The Brent crude contract for August delivery was at $73.71 per barrel on Tuesday as against $76.98 on Monday.
According to data on RBI’s Negotiated Dealing System-Order Matching platform, the turnover today was 450.10 bln rupees, compared with 332.60 bln rupees on Tuesday. Meanwhile, trades aggregating 300.00 mln rupees were settled in six deals with the digital rupee today, as against 350 mln rupees settled in seven deals on Tuesday.
OUTLOOK
On Thursday, bonds are seen taking cues from higher-than-expected India GDP data, dealers said.
India’s Jan-Mar GDP growth was at 6.1% as against 4.0% a year ago. An Informist poll had estimated the growth data to be 5.1% for the quarter ended March. Moreover, the GDP growth estimate for 2022-23 (Apr-Mar) was revised to 7.2% from 7.0% earlier.
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 6.97-7.03%.
India Gilts: Up as US ylds, crude fall; mkt lacks firm domestic cues
MUMBAI–1530 IST–Prices of government bonds remained up, tracking a fall in US Treasury yields and crude oil prices, dealers said. However, after the initial rise, prices moved in a narrow range for rest of the day due to a lack of firm cues in the domestic market.
“The market has not moved much after the initial movement tracking US yields,” a dealer at a private bank said. “If there was a corporate in the market, the prices should have moved much higher.”
In early trade, dealers had speculated that a corporate entity had stepped up purchases of short-term gilts to protect its underlying liability and interest payout for its recent debt issuance.
Dealers also speculated that a state-owned insurer likely stepped up purchases of 10- and 14-year bonds to deploy funds it received at the end of the month.
The yield on the benchmark 10-year US Treasury note fell to 3.66% during the day from 3.72% at the end of Indian market hours on Tuesday. US Treasury yields fell amid uncertainty over the passage of the bipartisan US debt ceiling deal in Congress. The deal has to be passed before Jun 5, or the country will not be able to meet its financial obligations, the US Treasury Department has said.
Meanwhile, the Brent crude contract for August delivery also settled lower at $73.71 per barrel on Tuesday as against $76.98 on Monday, which aided gilt prices.
According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was 394.85 bln rupees at 1530 IST, compared with 225.10 bln rupees at 1530 IST on Tuesday.
For the rest of the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.97-7.01%. (Kasthuri Akhil)
India Gilts: Remain up tracking fall in US yields, crude oil prices
MUMBAI–1200 IST–Prices of government bonds remained up tracking a fall in US Treasury yields and crude oil prices, dealers said. Improved liquidity in the banking system aided demand for short-term gilts.
Bond prices were also supported as foreign banks likely covered their short bets in the secondary market, dealers said. “Some short covering did happen in the morning, but there isn’t any genuine buying today,” a dealer at a state-owned bank said. “PSUs
(state-owned banks) have been getting deposits of 2,000-rupee banknotes, so they will come to buy at 7% and above levels.”
Some dealers speculated that a corporate house stepped up purchase of short-term bonds to protect their underlying liability and interest payout for its recent debt issuance.
Liquidity in the banking system is currently estimated to be in a surplus of 1.35 trln rupees, up from 1.04 trln rupees on Tuesday. The surplus also widened due to month-end spending by the government in the form of salaries and pension payouts.
Crude oil fell around 4% on Tuesday ahead of a meeting of Organization of the Petroleum Exporting Countries and its allies, including Russia, on Saturday. Investors are unsure if the group will cut supply further. The Brent crude contract for August delivery was at $73.71 per barrel on Tuesday as against $76.98 on Monday.
Meanwhile, US Treasury yields fell amid uncertainty over the passage of the bipartisan US debt ceiling deal in the Congress. The deal has to be passed before Jun 5, or the country will not be able to meet its financial obligations, the US Treasury Department has said. The yield on the benchmark 10-year US Treasury note fell to 3.68% today as against 3.72% at the end of Indian market hours on Tuesday.
According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was 244.85 bln rupees at 1200 IST compared with 84.05 bln rupees at 1130 IST on Tuesday.
For the rest of the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.96-7.01%. (Nishat Anjum)
India Gilts: Up as US yields fall; traders await India GDP data
NEW DELHI–0925 IST–Prices of government bonds were up tracking an overnight fall in US Treasury yields, dealers said. However, the gains were capped due to the lack of significant domestic cues.
The yield on the benchmark 10-year US Treasury note settled lower on Tuesday due to optimism that the deal to raise the US debt ceiling would get passed in the US Congress.
On Saturday, US President Joe Biden and congressional Republican Kevin McCarthy forged a tentative deal to suspend the US debt ceiling of $31.4 trln until January 2025. In case the deal isn’t passed before Jun 5, the country will not be able to meet its financial obligations, the US Treasury Department said.
On Tuesday, McCarthy said the deal should be “easy” for Republicans to vote for and was likely to be passed, according to a Reuters report. “It feels good. We’ll see when the vote starts,” the report quoted Biden as saying.
The yield on the benchmark 10-year US Treasury note fell to 3.68% today as against 3.72% at the end of Indian market hours 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.
The market now looks forward to a series of key economic data, due this week, to gain clarity on the rate trajectory in the world’s largest economy, dealers said. Data on job openings and labour turnover survey for April is due for release today, followed by the jobs report for May, due Friday.
According to the CME FedWatch tool, about 59% of Fed fund futures traders–up from 33% last week–now expect the Fed to hike rates by 25 basis points in June, while the rest see the rates unchanged.
Some traders stocked up on gilts on the view that prices might rise in the near term, dealers said. “Everyone is buying because these levels are quite good, and prices should rise going forward,” a dealer at a state-owned bank said. “In terms of rate hike, I don’t see the Reserve Bank of India going with a hike, even if the Fed hikes rates because they have different concerns, and we have different concerns.”
Back home, traders await India’s GDP data for Jan-Mar and 2022-23 (Apr-Mar), due later today. The data is expected to provide guidance to the domestic rate-setting panel on its rate trajectory, ahead of the panel’s meeting on Jun 6-8, dealers said.
India’s GDP growth is likely to have risen to 5.1% in Jan-Mar from 4.4% the previous quarter mainly due to buoyancy in services activity and an uptick in private consumption, according to a poll of 21 economists by Informist.
According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was 83.55 bln rupees at 0925 IST compared with 13.05 bln rupees at 0925 IST on Tuesday.
During the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.95-7.03%. (Anjali)
India Gilts: Seen up tracking overnight fall in US yields
MUMBAI – Prices of government bonds are seen opening higher, tracking an overnight fall in US Treasury yields. Traders may avoid aggressive bets during the day due to lack of firm cues in the domestic market, which may limit the gains, dealers said.
Today, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.98-7.03% as against 7.01% on Tuesday.
The yield on the benchmark 10-year US Treasury note fell to 3.68% in early Asian trade from 3.72% at the end of Indian market hours 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.
US Treasury yields fell amid uncertainty over the passage of the bipartisan US debt ceiling deal in the Congress. The deal has to be passed before Jun 5, or the country will not be able to meet its financial obligations, the US Treasury Department has said.
On Tuesday, McCarthy said the deal should be “easy” for Republicans to vote for, and was likely to be passed, according to a Reuters report. “It feels good. We’ll see when the vote starts,” the report quoted Biden as saying.
The House Rules Committee began to consider the 99-page bill on Tuesday.
The market will keep a close watch on a series of key economic data in the US, due later this week, for clarity on the rate trajectory in the world’s largest economy, dealers said. Data on job openings and a labour turnover survey for April are due for release today, followed by the jobs report for May, due on Friday.
According to the CME FedWatch tool, about 60% of Fed fund futures traders–up from 33% last week–now expect the US Federal Reserve to hike rates by 25 basis points in June, while the rest see the rates unchanged.
Back home, traders eye growth data for Jan-Mar and 2022-23 (Apr-Mar), due for release after market hours today, dealers said. India’s GDP growth is likely to have risen to 5.1% in Jan-Mar from 4.4% the previous quarter, mainly due to buoyancy in services activity and an uptick in private consumption, according to a poll of 21 economists by Informist.
Some traders expect the Reserve Bank of India’s monetary policy decision to be driven by domestic factors alone. However, some are also sceptical about the domestic rate-setting panel keeping rates unchanged in June amid growing expectations of another rate hike by the Fed next month, dealers said. (Kasthuri Akhil)
End
US$1 = 82.72 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Manisha Baxla
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