Informist, Thursday, Nov 30, 2023
By M.C. Adhiinthran and Aaryan Khanna
MUMBAI – Prices of government bonds ended lower today as traders placed more short bets on the 10-year benchmark 7.18%, 2033 paper ahead of the 300-bln-rupee auction on Friday, dealers said.
On Friday, the government will sell 70 bln rupees of the 7.37%, 2028 bond, 130 bln rupees of the 7.18%, 2033 bond, and 100 bln rupees of the 7.30%, 2053 bond.
The 10-year benchmark 7.18%, 2033 bond closed at 99.30 rupees, or 7.28% yield, against 99.50 rupees, or 7.25% yield, on Wednesday.
Dealers speculated that primary dealerships placed short bets to make room for the fresh supply of bonds from the auction, while state-owned banks, foreign banks, and private banks were speculated to have been the buying side.
Demand at the debt sale for state and central government bonds has been poor for the past week, which also prompted traders to ramp up their short sales, anticipating they would be able to cover the bets at the auction by picking up the 2033 bond at a lower price, dealers said.
“Foreign banks do not cover positions the way other banks do,” a dealer at a state-owned bank said. “They cover their positions in the OIS (overnight indexed swaps) market. Currently, there is a paying interest going on, so it is possible that they are buying in the gilts market.” Foreign banks have been top net buyers for the last two days.
Moreover, with the banking system liquidity in a deficit, some traders were selling to get cash in hand in order to avoid borrowing at higher rates, dealers said. At the end of trade on Wednesday, liquidity in the banking system was in a deficit of 1.04 trln rupees, according to Reserve Bank of India data.
Meanwhile, the market awaited the Indian GDP print for the September quarter. According to an Informist poll, GDP was seen easing to 6.8% during the quarter from 7.8% in Apr-Sep. India’s GDP grew sharply higher than expected at 7.6% in Jul-Sep, driven by double-digit growth in the industry, data released after market hours today by the National Statistical Office showed.
Looking at global cues, traders await US personal consumption expenditure data which is to be released after market hours today, dealers said. The personal consumption expenditure data is expected to show that inflation eased in October from the previous month.
Traders also await the release of US unemployment insurance weekly claims report, due for release later today, dealers said. According to a Market News poll, analysts expect the data to show 218,000 claims for the week ended Saturday.
With no updates on Bloomberg’s decision on inclusion of India’s sovereign bonds in its debt indices, the market is no longer expecting an inclusion in the indices, rather it has become a non-event for the market, dealers said. The decision on inclusion was expected to be released by November-end.
Some estimates of India’s November CPI print topping 6%, above the Reserve Bank of India’s medium-term target band of 2-6%, also led traders to trim their gilt holdings, dealers said.
“Traders are ruining the market for no reason,” a dealer at a private bank said. “Before inflation data, there is the RBI policy, which could really be a positive since the US rate trajectory has changed.”
The Monetary Policy Committee is scheduled to meet Dec 6-8, with the panel likely to stand pat on the repo rate at 6.50% and its stance unchanged at “withdrawal of accommodation”. RBI Governor Shaktikanta Das is expected to reiterate the need to bring CPI inflation down to 4%.
According to data on the RBI’s Negotiated Dealing System-Order Matching platform, the turnover was 375.75 bln rupees, compared with 402.25 bln rupees on Wednesday. There were two trades worth 100 mln rupees using the wholesale digital rupee pilot today, for the third day in a row.
OUTLOOK
On Friday, gilt prices are seen opening lower ahead of the 300-bln-rupee weekly gilt auction at 1030-1130 IST, dealers said. India’s GDP growth was higher than anticipated, likely putting a dampener on hopes of a rate cut in the next 12 months.
India’s GDP grew sharply higher than expected at 7.6% in Jul-Sep, driven by double-digit growth in industry, data released after market hours by the National Statistical Office showed. An Informist poll of 21 economists had projected the reading at 6.8%.
On Friday, the government will sell 70 bln rupees of the 7.37%, 2028 bond, 130 bln rupees of the 7.18%, 2033 bond, and 100 bln rupees of the 7.30%, 2053 bond.
Inflation data for the US will also be closely watched later today. The market is also waiting for Bloomberg’s decision on the inclusion of India’s sovereign bonds in its widely-tracked debt indices, though hopes of inclusion have fizzled out.
A sharp move in US Treasury yields and crude oil prices may also lend cues at opening.
The yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.23-7.32%.
India Gilts: Remain down on short bets ahead of weekly auction on Fri
MUMBAI–-1444 IST–The prices of government bonds remained down as traders placed short bets ahead of the 300-bln-rupee weekly gilt auction on Friday, dealers said.
“The market today will remain range-bound and will hold the 7.27% levels (on the benchmark 7.18%, 2033 bond) as not much activity will take place today, since tomorrow (Friday) we have the gilt auction,” a dealer at a primary dealership said.
Dealers speculated that state-owned banks were on the buying side. State-owned banks would pick the 10-year paper around 7.27% level, which is considered lucrative. “PSUs (state-owned banks) will be on the buying side today as they sold their bonds yesterday (Wednesday),” a dealer at a state-owned bank said. State-owned banks were net sellers on Wednesday.
Additionally, dealers speculated that the foreign banks were on the buying side along with state-owned banks as they have been doing so for the past two days. Foreign banks were top net buyers on the previous day as well.
In the second half of the trading session, traders avoided aggressive bets due to lack of firm domestic cues, dealers said. Meanwhile, primary dealerships placed short bets on the 10-year paper ahead of the 300-bln-rupee gilt auction, dealers said. Traders typically cover their short bets at the auction.
On Friday, the government said it will sell 70 bln rupees of the 7.37%, 2028 bond, 130 bln rupees of the 7.18%, 2033 bond, and 100 bln rupees of the 7.30%, 2053 bond.
The market is also awaiting India’s GDP print for the September quarter scheduled to be released at 1730 IST. According to a poll of 21 economists by Informist, India’s GDP growth may ease to 6.8% in the September quarter from a four-quarter high of 7.8% in Apr-Jun.
Moreover, no news regarding India’s sovereign bond inclusion in Bloomberg’s debt indices has left traders considering it as a non-event, dealers said.
On the global front, the market may keep a close watch for the outcome of the Organization of the Petroleum Exporting Countries and its allies’ meeting scheduled to be held today.
Going forward, dealers expect the market to remain range-bound ahead of the Reserve Bank of India’s Monetary Policy Committee meeting, scheduled for Dec 6-8.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the market-wide turnover was 243.35 bln rupees, compared with 300.10 bln rupees at 1430 IST on Wednesday.
For the rest of the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.22-7.28%. (Siddhi Chauhan)
India Gilts: Dn as traders place short bets before weekly auction Fri
MUMBAI–1240 IST–Prices of government bonds fell as traders placed short bets ahead of the 300-bln-rupee auction, scheduled for Friday, dealers said. Primary dealerships were speculated to have placed short bets before the weekly auction.
On Friday, the government will sell 70 bln rupees of the 7.37%, 2028 bond, 130 bln rupees of the 7.18%, 2033 bond, and 100 bln rupees of the 7.30%, 2053 bond.
“There is no aggressive buying happening as there are no fresh triggers in the market. It is also anticipating a bit of correction in the US yields,” a dealer at a private bank said.
Dealers speculated that primary dealerships, state-owned banks, and some mutual funds were expected to be on the selling side. While foreign banks and private banks were speculated to be on the buying side.
As banking system liquidity is in the deficit, traders were selling in order to get cash in hand so that they could avoid borrowing at higher rates, dealers said. At the end of trade on Wednesday, liquidity in the banking system was in a deficit of 1.04 trln rupees.
Moreover, the market awaits the Indian GDP print for the September quarter, which is scheduled for a release at 1730 IST. According to a poll of 21 economists by Informist, India’s GDP growth may ease to 6.8% in the September quarter from a four-quarter high of 7.8% in Apr-Jun.
With no updates on Bloomberg’s decision on the inclusion of India’s sovereign bonds in its debt indices, the market is no longer expecting an inclusion in the indices, rather it has become a non-event for the market, dealers said. The decision on inclusion was expected to be released by November-end.
Volume remained concentrated in the benchmark 7.18%, 2033 and 7.18%, 2037 paper, which has been the case for most of the month. Liquidity deficit in the banking system has pushed short-term bonds out of favour, dealers said.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the market-wide turnover was 163.80 bln rupees, compared with 223.10 bln rupees at 1230 IST on Wednesday.
During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.22-7.28%. (Anupreksha Jain)
India Gilts: Largely unchanged on lack of significant domestic cues
MUMBAI–0930 IST–Prices of government bonds were largely unchanged as traders avoided placing aggressive bets on lack of firm domestic cues, dealers said. Some traders placed short bets ahead of the 300-bln-rupee gilt auction, scheduled on Friday, which weighed on the gilt prices.
The government said it will sell 70 bln rupees of the 7.37%, 2028 bond, 130 bln rupees of the 7.18%, 2033 bond, and 100 bln rupees of the 7.30%, 2053 bond.
“The market is quite dull today. The US yields are largely the same as compared to our market close,” a dealer at a private bank said. “There would be some people going short ahead of the auction, and some PSUs (state-owned banks) are likely profit booking.” The yield on the benchmark 10-year US Treasury note fell to 4.27% in early trade, as against 4.28% at the closing hours of the Indian market on Wednesday.
Volume remained concentrated in the benchmark 7.18%, 2033 and 7.18%, 2037 paper, which has been the case for most of the month. Liquidity deficit in the banking system has pushed short-term bonds out of favour, dealers said. At the end of trade on Wednesday, liquidity in the banking system was in a deficit of 1.04 trln rupees.
The market awaits the Indian GDP print for the September quarter, which is scheduled at 1730 IST. According to a poll of 21 economists by Informist, India’s GDP growth may ease to 6.8% in the September quarter from a four-quarter high of 7.8% in Apr-Jun.
Meanwhile, on a monthly basis, the yield on the benchmark 10-year paper has fallen almost 11 basis points in November. This comes against the backdrop of ease in US Treasury yields. Yield on the benchmark 10-year US Treasury note eased to 4.27% from 4.77% in the start of the current month.
Even as the domestic market closely tracks the movement of US Treasury yields, it does not reflect a tick by tick fall of safe-haven bond yields, dealers said.
Traders had keenly awaited the outcome of Bloomberg’s decision on the inclusion of India’s sovereign bonds in its widely-tracked debt indices, which was expected to be released by November-end. However, with no updates regarding the inclusion, now the hopes of inclusion have fizzled out, dealers said.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the market-wide turnover was 31.60 bln rupees, compared with 51.96 bln rupees at 0930 IST on Wednesday.
During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.22-7.28%. (Nishat Anjum)
India Gilts: Seen opening higher as US yields fall overnight
MUMBAI – Prices of government bonds are seen opening higher as US Treasury yields fell overnight, dealers said. However, a lack of significant domestic cues may keep the market lacklustre.
During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.21-7.28%, as against 7.25% on Wednesday. Dealers said bonds may remain range-bound throughout the day while closely tracking global cues.
During the day, traders may place short bets ahead of the 300-bln-rupee gilt auction on Friday, dealers said. Some may also trim their bond holdings to make space for the fresh supply. The government said it will sell 70 bln rupees of the 7.37%, 2028 bond, 130 bln rupees of the 7.18%, 2033 bond, and 100 bln rupees of the 7.30%, 2053 bond.
Meanwhile, the yield on the benchmark 10-year US Treasury note fell to 4.26% in Asian trade today, as against 4.28% at the closing hours of the Indian market on Wednesday. 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 for the third consecutive session as the latest reading on economic growth failed to upend market expectations that the US Federal Reserve rate cut was on the horizon.
The US GDP increased at a 5.2% annualised rate in the September quarter, faster than the previously reported 4.9%. It was the fastest expansion since the fourth quarter of 2021, the US Commerce Department said in its second estimate of third-quarter GDP.
The better-than-expected GDP data for the Jul-Sep quarter boosted investors’ confidence that the Fed is done with its rate hike cycle campaign. The GDP report also confirmed inflation was trending lower in the world’s largest economy, suggesting that the Fed may revise its monetary policy measures.
According to CME Group’s FedWatch tool, the first sign of a rate cut is in March, with 48.6% Fed Fund futures traders expecting a rate cut, as against nearly 35% late on Tuesday. (M.C. Adhiinthran)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Aditya Sakorkar
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