Informist, Wednesday, Dec 27, 2023
By Siddhi Chauhan and Nishat Anjum
MUMBAI – Prices of government bonds ended lower as mutual funds were speculated to have sold the benchmark 7.18%, 2033 bond at levels considered lucrative, dealers said.
Moreover, some traders placed short bets on the 7.18%, 2033 paper ahead of the 330 bln rupees bond auction on Friday, which weighed on the prices, dealers said.
On Friday, the government will sell 70 bln rupees of the 7.37%, 2028 bond, 160 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 99.80 rupees, or 7.21% yield, against 99.98 rupees, or 7.18%, on Tuesday.
Dealers speculated that a large corporate fund redeemed its investment from a mutual fund, thereby leading the mutual fund to sell in the government security market.
“The market doesn’t have that much activity, it was a dull market today, a dealer at a state-owned bank said. The only activity that happened was a result of the banks’ requirements, otherwise nothing was there.”
Overall, the volumes in the market remained muted due to the absence of foreign traders, dealers said. Foreign banks usually scale down their activity in the market during this time of the year as they close their books.
Short-term bonds remained out of favour due to the prevailing liquidity deficit in the banking system, dealers said. At the end of trade on Tuesday, the liquidity deficit in the banking system hit a fresh high of 2.68 trln rupees, as against 2.67 trln rupees on Monday, according to the Reserve Bank of India data.
For the majority of the day, the market remained lacklustre owing to a lack of firm domestic cues, dealers said. Moreover, the market disregarded an uptick in crude oil prices.
Dealers said the market will closely eye the movement in crude oil prices amid an escalation of tensions in West Asia. However, it would be a worry only if the prices top the psychologically-crucial level of $90 a barrel.
“Ahead of the general elections (in 2024), it is unlikely that there will be any price rise for the retail customer,” a dealer at a primary dealership said. “On top of that, the rise is due to the supply constraints rather than genuine demand. So, the market also sees this as a temporary thing.”
Brent crude oil futures for March delivery rose to $81.33 per bbl as against $79.20 a bbl at the time of the Indian market close on Tuesday.
A few major oil companies, such as BP, have already announced that they have stopped shipping their containers via the Red Sea following attacks by the Houthi militia.
Brent crude oil futures for March delivery rose to $80.85 per bbl at settlement on Tuesday, up 2.6%, and were little changed in Asian trade today. Prices are not a worry currently, but Brent crude oil prices topping the mark of $85-per-bbl may cause some concern in the form of imported inflation in the economy, dealers said. Over the last six months, oil prices hadn’t sustained above $85-a-bbl despite repeated geopolitical shocks.
According to data on the RBI’s Negotiated Dealing System-Order Matching platform, the turnover today was 230.30 bln rupees, down from 164.05 bln rupees on Tuesday. There were no trades using the wholesale digital rupee pilot today, against two trades worth 100 mln rupees the previous day.
OUTLOOK
On Thursday, gilt prices may open steady as traders will likely avoid aggressive bets due to lack of firm domestic cues, dealers said. Some traders may place short bets ahead of the 330-bln-rupee bond auction on Friday.
A sharp move in US Treasury yields or crude oil prices may lend cues at opening.
The yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.18-7.24% during the day.
India Gilts: Down as traders place short bets; volume low
MUMBAI–1507 IST–Prices of government bonds fell in thin trade today as some traders placed short bets ahead of the 330-bln-rupee auction on Friday, dealers said. On Friday, the government will sell 70 bln rupees of the 7.37%, 2028 bond, 160 bln rupees of the 7.18%, 2033 bond, and 100 bln rupees of the 7.30%, 2053 bond.
The market was dull due to the absence of firm cues both on the domestic and global front. In addition, volumes remained low due to minimal participation of foreign banks in the market, dealers said.
Typically, foreign banks scale back trading activity as they close their books towards year-end. Foreign investment in gilts, which was robust in the first half of December, has dried up close to the year-end, dealers said.
“Volumes have completely dried down. Traders are missing in action along with investors, leading to minimal volumes. Only shorting is happening on the 10-year paper,” a dealer at a primary dealership said. “How can we expect movement in the market when players are not there in the market? Mostly, the movement of traders gives direction to the market.”
Further, owing to the liquidity deficit in the banking system, traders refrained from placing large bets in the short-term papers, dealers said. At the end of trade on Tuesday, the liquidity deficit in the banking system hit a fresh high of 2.68 trln rupees, as against 2.67 trln rupees on Monday, according to the RBI data.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the market-wide turnover was 160.65 bln rupees compared with 104.30 bln rupees at 1530 IST on Tuesday.
For the rest of the day, the yield on the 10-year benchmark, 7.18%, 2033 bond is seen at 7.17-7.20%. (Anupreksha Jain)
India Gilts: Most in thin band; 10-yr bond tad down amid low volume
MUMBAI–1325 IST–Prices of most government bonds remained in thin band as traders refrained from placing aggressive bets due to the absence of domestic and global cues, dealers said. The price of the benchmark 7.18%, 2033 paper bond was a tad down as some traders placed short bets ahead of the 330-bln-rupee auction on Friday.
On Friday, the government will sell 70 bln rupees of the 7.37%, 2028 bond, 160 bln rupees of the 7.18%, 2033 bond, and 100 bln rupees of the 7.30%, 2053 bond.
“Overall, the volume in the market is quite less, there is nothing much happening in the market,” a dealer at a state-owned bank said. “The prices of the paper (benchmark 10-year bond) fell because traders would have placed short bets on this paper as it is up for auction on Friday.”
The volume is expected to remain lacklustre as is normally the case in December as foreign banks close their books towards year-end, dealers said.
The gilt market disregarded a rise in crude oil prices, as traders expect it to be a temporary issue, dealers said. Over the last six months, oil prices have not sustained above $85 a bbl despite repeated geopolitical shocks. If crude oil prices cross the crucial mark of $85-per-bbl, it may weigh on gilt prices as this may lead to concerns in the form of imported inflation, dealers said.
Brent crude oil futures for March delivery rose to $81.22 per bbl as against $79.20 a bbl at the time of Indian market close on Tuesday. Crude oil prices crossed the crucial mark of $80 a barrel due to increased tensions in the Red Sea. This happened as a few major oil companies, including BP, announced that they have stopped shipping their containers via the Red Sea following attacks by the Houthi militia.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the market-wide turnover was 101.75 bln rupees compared with 50.80 bln rupees at 1230 IST on Tuesday.
During the day, the yield on the 10-year benchmark, 7.18%, 2033 bond is seen at 7.17-7.20%. (Siddhi Chauhan)
India Gilts: Steady on lack of firm domestic cues; volumes dull
MUMBAI–1017 IST–Prices of government bonds were steady as traders refrained from placing aggressive bets due to the absence of both domestic and global cues, dealers said. During the day, traders may closely watch the movement in crude oil prices as they rose to their highest level this month.
“This is the week of exceptionally dull volume as investors are missing in action amid no cues. In addition to this, traders’ participation is largely dull as well,” a dealer at a private bank said. “Everyone is long enough in the market, nobody is interested in taking fresh positions.”
Traders typically follow the momentum of investors for cues on gilt prices. Foreign investment in gilts, which was robust in the first half of December, has dried up close to the year-end as foreign banks close their accounts, dealers said.
Meanwhile, dealers said the market may closely track the movement in crude oil prices amid an escalation of tensions in West Asia. A few major oil companies, such as BP, have already announced that they have stopped shipping their containers via the Red Sea following attacks by the Houthi militia.
Brent crude oil futures for March delivery rose to $80.85 per bbl at settlement on Tuesday, up 2.6%, and were little changed in Asian trade today. Prices are not a worry currently, but Brent crude oil prices topping the mark of $85-per-bbl may cause some concern in the form of imported inflation in the economy, dealers said. Over the last six months, oil prices hadn’t sustained above $85 a bbl despite repeated geopolitical shocks.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the market-wide turnover was 15.30 bln rupees compared with 21.05 bln rupees at 1030 IST on Tuesday.
During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.17-7.20%. (Anupreksha Jain)
MUMBAI – Government bonds are seen opening steady due to lack of firm domestic cues, though a surge in crude prices and escalating tensions in West Asia may weigh on gilts, dealers said.
The yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.15-7.21% today, against 7.18% on Tuesday.
During the day, dealers speculate that the volumes may remain dull as they have over the last two trading sessions. Dealers said that the movement in gilt prices would largely be determined by traders as there may be no investors in the market. Foreign banks would also stay on the sidelines ahead of the year-end, when they close their books.
Some traders may place short bets on the benchmark 7.18%, 2033 bond ahead of the gilts auction on Friday, dealers said. Traders usually cover their short bets at the auction. On Friday, the government will sell 70 bln rupees of the 7.37%, 2028 bond, 160 bln rupees of the 7.18%, 2033 bond, and 100 bln rupees of the 7.30%, 2053 bond.
On the global front, Brent crude for March delivery topped $80 a barrel for the first time this month, jumping 2.6% on Tuesday to settle at $80.85 a bbl. The Yemen-based Houthi militia continued attacks on containers passing through the Red Sea and made oil companies apprehensive of a stable supply.
The yield on the benchmark 10-year US Treasury note was little changed from the previous day. The yield on the benchmark 10-year US Treasury note was at 3.88% in Asian trade today as against 3.89% at settlement on Tuesday. (Siddhi Chauhan)
End
US$1 = 83.34 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Vidhi Verma
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