Informist, Monday, Jun 5, 2023
By Kasthuri Akhil
MUMBAI – Prices of government bonds ended lower, tracking a rise in US Treasury yields. Prices moved within a narrow range after falling in early trade as traders refrained from placing aggressive bets due to caution ahead of the outcome of the Monetary Policy Committee’s meeting on Thursday, dealers said.
The 10-year benchmark 7.26%, 2033 bond ended at 101.82 rupees, or 7.00% yield, against 101.92 rupees, or 6.98% yield on Friday.
Losses were limited as traders stepped up purchases of the 10-year benchmark 7.26%, 2033 paper at 7% yield, considered lucrative, dealers said. “Market is still positive. Whenever it goes beyond 7% (yield on the 2033 bond), buying starts coming in,” a dealer at a private bank said.
According to an Informist poll, an overwhelming majority of 29 out of 30 respondents expect the domestic rate-setting panel to keep the repo rate unchanged at 6.50% at the end of its three-day meeting on Thursday.
The market is also eyeing the panel’s policy stance decision as it may give insight into the future rate trajectory, dealers said. The panel kept the policy stance unchanged at “withdrawal of accomodation” in its April policy review.
“Market is cautious only about the stance. However, in my opinion, MPC won’t change the stance this soon, as it will not leave any room for them to do a U-turn and hike if needed,” a dealer at a state-owned bank said.
Moreover, following the 18-month low CPI print in April, some analysts now expect the central bank to lower its inflation forecast for 2023-24 (Apr-Mar). The Reserve Bank of India had projected the CPI at 5.2% for 2023-24 in its April policy review.
Apart from lower domestic inflation, poll participants expect an extended pause because of expectations that the US Federal Reserve may soon put an end to its aggressive rate hike cycle at its policy meeting on Jun 13-14.
The yield on the benchmark 10-year US Treasury note rose to 3.75% towards the end of trade from 3.60% at the close of Indian market hours on Friday. US Treasury yields rose after data showed non-farm payrolls rose more than anticipated in May, which may exert pressure on the Federal Reserve to raise interest rates later this month.
Non-farm payrolls rose by 339,000 jobs last month. Economists polled by Reuters had forecast an increase by 190,000. The economy created 93,000 more jobs in March and April than previously estimated, the survey showed on Friday.
However, investors now await the Fed’s policy review meeting on Jun 13-14 after new data showed a jump in the country’s unemployment rate to a seven-month high of 3.7%. Over 77% of market participants now expect the Fed to keep rates unchanged at 5.00-5.25% at its June policy meet, according to the CME group’s FedWatch tool.
According to data on RBI’s Negotiated Dealing System-Order Matching platform, the turnover today was 413.80 bln rupees, compared with 466.10 bln rupees on Friday. Meanwhile, trades aggregating 250 mln rupees were settled in five deals with the digital rupee today, as against 200 mln rupees settled in four deals on Friday.
OUTLOOK
Gilts are seen opening steady on Tuesday on caution ahead of the Monetary Policy Committee’s decision on Thursday, 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 6.96-7.04%.
India Gilts: Remain dn as US ylds rise; traders buy at key yld level
NEW DELHI–1515 IST–Government bonds remained down, tracking a rise in US Treasury yields, dealers said. However, prices didn’t fall more as traders stocked up on the benchmark 7.26%,2033 bond at 7% yield level.
Traders now await the Monetary Policy Committee’s policy review decision at the end of its three-day meeting on Thursday. Dealers speculated that market should start positioning for the event on Tuesday. “It is more of a known event as market expect the pause to continue” a dealer at a state-owned bank said. “From tomorrow the market will start positioning for the event, and most of us will take position in the morning of the outcome day.”
After falling in early trade, bonds moved within a narrow range as traders avoided placing large bets on caution ahead of Monetary Policy Committee’s decision, dealers said.
The yield on the benchmark 10-year US Treasury note rose to 3.73% in Asian trade today from 3.60% at the close of Indian markets on Friday. US Treasury yields rose on Friday after data showed non-farm payrolls rose more than anticipated in May, which may exert pressure on the Federal Reserve to raise interest rates later this month.
According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was at 293.30 bln rupees at 1510 IST, compared with 330.65 bln rupees at 1500 IST on Friday.
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: Remain down tracking rise in US yields
MUMBAI–1205 IST–Prices of government bonds remained down, tracking a rise in US Treasury yields. However, traders stepped up purchases of the 10-year benchmark 7.26%, 2033 bond at the 7% yield level, considered lucrative, which prevented prices from falling further, dealers said.
“There is strength in our market despite US yields rising by about 8-10 basis points. A pause is expected by our Monetary Policy Committee, so market is going to hold at these levels for the day,” a dealer at a state-owned bank said.
The yield on the benchmark 10-year US Treasury note rose to 3.73% in Asian trade today from 3.60% at the close of Indian markets on Friday. US Treasury yields rose on Friday after data showed non-farm payrolls rose more than anticipated in May, which may exert pressure on the Federal Reserve to raise interest rates later this month.
After falling in early trade, domestic gilt prices moved within a narrow range as traders avoided placing aggressive bets, awaiting the MPC’s three-day meeting, which starts on Tuesday, dealers said. In a poll by Informist, an overwhelming majority of 29 of the 30 respondents said they expect the domestic rate-setting panel to keep the repo rate unchanged at 6.50%
Traders were also cautious as the market remains divided about the prospects of the committee retaining its stance in its policy decision on Thursday, dealers said. “…the stance would not change to neutral as the central bank would not be able to hike rates at all if that happens,” the dealer said.
In its policy review in April, the panel had kept the policy stance unchanged at ‘withdrawal of accomodation”.
According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was at 178.95 bln rupees at 1205 IST, compared with 164.10 bln rupees at 1200 IST on Friday.
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: Down as US yields rise; traders eye MPC meet outcome
NEW DELHI–0935 IST–Government bonds were down, tracking a rise in US Treasury yields, dealers said. Moreover, the sentiment from Friday continued after lower than expected cut-offs at the auction, which further weighed on gilts.
“The market is majorly tracking US yields, as it rose 10-12 basis points (yield on the benchmark 10-year US Treasury note), so our market had to go for at least 2-3 bps rise (yield on the benchmark 7.26%,2033 bond),” a dealer at a state-owned bank said. “And also the auction…the sentiment is continuous.”
The yield on the benchmark 10-year US Treasury note rose to 3.73% in Asian trade today from 3.60% at the close of Indian markets 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 Treasuries rose on Friday after data by the Labor Department showed non-farm payrolls rose more than anticipated in May, which may exert pressure on the Federal Reserve to raise interest rates later this month. Non-farm payrolls rose by 339,000 last month. Economists polled by Reuters had forecast an increase by 190,000. The economy created 93,000 more jobs in March and April than previously estimated, the survey showed.
Traders now await the Monetary Policy Committee’s policy review decision at the end of its three-day meeting on Thursday. The market widely expects the domestic rate-setting panel to keep the repo rate unchanged at 6.50%, dealers said. Traders also expect the panel to keep the policy stance unchanged at ‘withdrawal of accomodation’ as liquidity is still the same as in April, dealers said.
After the withdrawal of 2,000-rupee banknotes, banks have been receiving deposits more than anticipated, which has improved liquidity in the system, dealers said.
In a poll by Informist, an overwhelming majority of 29 of the 30 respondents said they expect the domestic rate-setting panel to keep the repo rate unchanged at 6.50%. Following the April CPI print, some analysts now expect the central bank to lower its inflation forecast for 2023-24 (Apr-Mar).
Apart from lower domestic inflation, poll participants expect an extended pause because of expectations that the US Federal Reserve may soon put an end to its aggressive rate hike cycle at its policy meeting on Jun 13-14.
According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the marketwide turnover was 67.60 bln rupees at 0925 IST, compared with 28.85 bln rupees at 0925 IST on Thursday.
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 lower as US yields rise; market eyes MPC meeting
MUMBAI – Prices of government bonds are seen opening lower tracking a rise in US Treasury yields, dealers said. However, traders may avoid placing aggressive bets during the day due to caution ahead of the Monetary Policy Committee’s three-day meeting, starting Tuesday.
Today, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.95-7.02% as against 6.98% on Friday.
The yield on the benchmark 10-year US Treasury note rose to 3.73% in Asian trade today from 3.60% at the time of Indian market close 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 Treasuries rose on Friday as a result of Labor Department data showing that non-farm payrolls rose more than anticipated in May, which may put pressure on the Federal Reserve to raise interest rates later this month. Non-farm payrolls rose by 339,000 jobs last month. Economists polled by Reuters had forecast an increase by 190,000. The economy created 93,000 more jobs in March and April than previously estimated, the survey showed on Friday.
However, investors now await the US Federal Reserve’s policy review meeting on Jun 13-14 after new data showed a jump in the country’s unemployment rate to a seven-month high of 3.7%. Over 77% of market participants now expect the Federal Reserve to keep rates unchanged at 5.00-5.25% at its June policy meet, according to the CME group’s FedWatch tool.
Back home, traders await the Monetary Policy Committee’s policy review decision, dealers said. According to an Informist poll, an overwhelming majority of 29 out of 30 respondents expect the domestic rate-setting panel to keep the repo rate unchanged at 6.50% at the end of its three-day meeting on Thursday.
The market is also eyeing the panel’s policy stance decision as it may give further insight into the rate trajectory, dealers said. The panel kept the policy stance unchanged at “withdrawal of accomodation” in its April policy review. (Nishat Anjum)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Deepshikha Bhardwaj
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