Informist, Thursday, Feb 22, 2024
By M.C. Adhiinthran
MUMBAI – Prices of government bonds ended slightly lower today as US Treasury yields rose intraday, dealers said. The market awaited the minutes of the Reserve Bank of India’s Monetary Policy Committee’s February meeting, which were released at 1700 IST.
The 10-year benchmark 7.18%, 2033 bond closed at 100.76 rupees, or 7.07% yield, compared with 100.86 rupees, or 7.05% yield, on Wednesday. The yield on the 10-year benchmark US Treasury note rose to 4.31%, from 4.26% at the time of the Indian market close on Wednesday. A rise in US yields narrows the interest rate differential between the safe-haven asset and emerging market debt, making the latter less appealing to foreign investors.
US yields rose after demand at the 20-year treasury note auction was weaker than expected. The market also digested the minutes of the recent Federal Open Market Committee meeting, which showed caution among policymakers about cutting rates too quickly. “Most participants noted the risks of moving too quickly to ease the stance of policy and emphasised the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to 2%,” the FOMC minutes, released at 0030 IST today, said.
“The market was largely range bound, but fell a little later as US yields rose,” a dealer at a primary dealership said. “Foreign banks have been supporting the market while PSUs (state-owned banks) and PDs (primary dealerships) have been booking profits.” State-owned banks have been the top net sellers for the last two trading sessions, data from the Clearing Corp of India Ltd showed.
During the day, some banks picked up illiquid securities from the secondary market as the yield levels were considered lucrative, dealers said. The 6.99%, 2026 bond, 6.18%, 2024 bond, 5.63%, 2026 bond, 5.74%, 2026 bond, 6.76%, 2061 bond and the 7.10%, 2029 bond saw an uptick in volumes today, data from the RBI’s Negotiated Dealing System–Order Matching platform showed. In the reported deals standard lot segment, volumes were led by illiquid bonds like the 6.99%, 2051 bond and 7.36%, 2052 bond, which were likely traded by foreign portfolio investors, dealers said.
“With the minutes coming up, people are moving their illiquid securities around,” a dealer at a state-owned bank said. “The minutes coming today should be a positive. The market is looking forward to Varma’s comments who voted for a rate cut.”
The market looked forward to the minutes of the MPC’s recent meeting for more cues on what level of liquidity the three RBI members on the committee, led by Governor Shaktikanta Das, would suggest their comfort with. The RBI has largely favoured a liquidity deficit in the banking system since August. Some traders hoped that the minutes would show the domestic rate-setting panel’s discomfort with the liquidity being in a large deficit, and might suggest the RBI move towards a near-neutral liquidity position in the near future, as external member Ashima Goyal had done previously.
The market also looked forward to comments from the external committee member Jayanth Varma, who voted for a rate cut in the recent meeting, a first since May 2020, dealers said. Goyal’s comments on sticking with the policy stance at “withdrawal of accommodation”, despite expressing her discomfort with the stance in prior policy reviews, would also be watched, dealers said.
According to data on the RBI’s Negotiated Dealing System-Order Matching platform, the turnover today was 392.20 bln rupees, down from 530.90 bln rupees on Wednesday. Two trades worth 500 mln rupees were carried out using the wholesale digital rupee pilot today, same as Wednesday.
OUTLOOK
On Friday, bond prices may take cues from the Monetary Policy Committee’s minutes of February’s meeting, which were released after market hours today. External members Varma and Goyal’s comments on rates and policy stance would be closely watched, with Varma voting for a rate cut – a first since May 2020.
Meanwhile, the three RBI members’ views on liquidity management in the banking system, and their target on overnight rates, would be the focus for traders. Some sections of the market were left disappointed with the lack of clarity on the central bank’s liquidity management actions at the policy review.
The yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.00-7.10% during the day.
India Gilts: Down as US ylds rise more; mkt eyes MPC meet minutes
MUMBAI–1429 IST–Prices of government bonds fell as US Treasury yields rose more during the day, dealers said. Traders avoided placing aggressive bets on caution ahead of the minutes of the Reserve Bank of India’s Monetary Policy Committee’s February meeting, to be released at 1700 IST.
“There is some selling bias in the market due to the rise in US yields,” a dealer at a private bank said. “Also, for the last two-three days there was a lot of buying in the market as FPIs (foreign portfolio investors) were very active. Today, FPIs do not seem to be very active in the market. So, there is not much support in the market.”
Dealers said that state-owned banks and primary dealerships were on the selling side in the secondary market, while foreign banks were on the buying side. State-owned banks were top net sellers on Tuesday and Wednesday, according to the Clearing Corp of India. Primary dealerships were also net sellers on Wednesday.
Yield on the benchmark 10-year US Treasury note rose to 4.33%, as against 4.26% at the time of the Indian market close on Wednesday. US Treasury yields inched up after demand for the 20-year US Treasury note at the auction was weaker than anticipated. Minutes of the recent Federal Open Market Committee meeting showed caution amongst policymakers about cutting rates too quickly.
In the US, minutes of the January meeting of the Federal Reserve showed that members of the US rate-setting panel were in no hurry to cut interest rates. They also said that more evidence is needed before easing the policy. However, they added that the rate hikes were likely over.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the market-wide turnover was 256.35 bln rupees, as against 327.30 bln rupees at 1430 IST on Wednesday.
During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.04-7.09%. (Anupreksha Jain)
India Gilts: In thin band; mkt awaits MPC meet minutes
MUMBAI–1234 IST–Prices of government bonds remained in thin band as traders avoided placing aggressive bets on caution ahead of the minutes of the Reserve Bank of India’s Monetary Policy Committee’s February meeting, to be released at 1700 IST today. The market disregarded the overnight rise in US Treasury yields.
“FOMC (Federal Open Market Committee) was largely hawkish, which I think people were expecting,” a dealer at a state-owned bank said. “People are really looking forward to MPC minutes this time. I don’t think it would be hawkish, and might be on the dovish side. I think yields might fall to 7.02% (on the 7.18%, 2033 bond) tomorrow (Friday) after minutes.”
Dealers look forward to comments from the panellists regarding the liquidity in the banking system. The RBI has largely favoured a liquidity deficit in the banking system, but that might not be reflected in the minutes, dealers said. They said that the minutes might show the domestic rate-setting panel’s discomfort with the liquidity being in a large deficit, and might move towards a near-neutral liquidity position in the near future. The market also looks forward to comments from the external committee member Jayanth Varma, who voted for a rate cut in the recent meeting, a first since May 2020, dealers said.
Some banks have been buying illiquid securities from the secondary market for their investment books, as the yield levels were lucrative, dealers said. The 6.18%, 2024 bond, the 7.10%, 2029 bond, and the 6.83%, 2029 bond were some illiquid securities that were picked up from the secondary market.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the market-wide turnover was 158.85 bln rupees, as against 229.75 bln rupees at 1230 IST on Wednesday.
During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.02-7.08%. (M.C. Adhiinthran)
India Gilts: Little changed as market lacks firm domestic cues
MUMBAI–0920 IST–Prices of government bonds were little changed in early trade, as traders avoided placing aggressive bets on lack of firm domestic cues. The market assessed the comments of the US Federal Reserve officials from the minutes of the January policy review meeting, dealers said.
The minutes were largely along the expected lines. However, they firmed the bets that the rate cut in the world’s largest economy is not near, dealers said. Minutes of the recent Federal Open Market Committee meeting showed caution among policymakers about cutting rates too quickly. “Most participants noted the risks of moving too quickly to ease the stance of policy and emphasised the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to 2%,” the minutes stated.
“Fed (meet) minutes didn’t say anything that Fed officials have not said outside on various occasions,” a dealer at a primary dealership said. “I am looking forward to (Jayanth) Varma’s comments, he has been largely right throughout his cycle.”
Meanwhile, on the domestic front, traders await the Monetary Policy Committee’s minutes of February’s meeting, scheduled to be released at 1700 IST, dealers said. In its meeting, the domestic rate-setting panel kept the repo rate unchanged at 6.50%, and maintained a ‘withdrawal of accommodation’ stance.
Traders are looking ahead to comments on liquidity and stance from each of the committee members. They may also take cues from the comments of external member Jayanth Verma, who voted for a 25 basis-point repo rate cut at the meeting—the first such vote since May 2020.
The market disregarded an overnight rise in US Treasury yields, dealers said. Meanwhile, the yield on the benchmark 10-year US Treasury note rose to 4.30%, as against 4.26% at the time of the Indian market close on Wednesday.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform–the market-wide turnover was 40 bln rupees, as against 82.70 bln rupees at 0930 IST on Wednesday.
During the day, yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.02-7.08%. (Nishat Anjum)
India Gilts: Seen tad down; market eyes MPC Feb meet minutes
MUMBAI – Prices of government bonds may open slightly lower, tracking an overnight rise in US Treasury yields, dealers said. The losses may remain limited as investors may step up purchase in the secondary market as the fresh supply for 2023-24 (Apr-Mar) has ended.
The yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.02-7.08%, against 7.05% on Wednesday. If the yields on the benchmark 2033 fall to 7.02% during the day, some traders may sell bonds at a profit, dealers said.
The market sentiment has remained positive in the week so far as there is no more supply pressure, and the offshore inflows have been robust, dealers said. It may continue during the day as well, offsetting the rise in US Treasury yields. Under the fully accessible route category, foreign portfolio investors have picked up bonds worth 13.9 bln rupees in the current week, according to data from Clearing Corporation of India Ltd.
Foreign investors have been buying ahead of the JP Morgan and Bloomberg index inclusions, dealers said. JP Morgan will add Indian gilts to its Global Bond Index-Emerging Markets starting June. Meanwhile, the inclusion of Indian bonds in Bloomberg Index Services Ltd is likely to take place by Sep-Oct.
Domestic investors may also pick up bonds from the secondary market as there are no more primary auctions for the fiscal year left, dealers said. The last primary auction for the current financial year ending March was on Friday.
Meanwhile, the yield on the benchmark 10-year US Treasury note rose to 4.31%, as against 4.26% at the time of the Indian market close on Wednesday. A rise in US yields narrows the interest rate differential between the safe-haven asset and emerging market debt, making the latter less appealing to foreign investors.
US Treasury yields inched up after the demand at the auction for the 20-year US Treasury note was weaker than anticipated. Minutes of the recent Federal Open Market Committee meeting showed caution among policymakers about cutting rates too quickly.
“Most participants noted the risks of moving too quickly to ease the stance of policy and emphasised the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to 2%,” the minutes stated.
On the domestic front, the market would await the Monetary Policy Committee’s minutes of February’s meeting, which will be released after market hours today, dealers said. In its meeting, the domestic rate-setting panel kept the repo rate unchanged at 6.50%, and maintained a ‘withdrawal of accommodation’ stance.
Traders are looking ahead to comments on liquidity and stance from each of the committee’s six members. They may also take cues from the comments of external member Jayanth Verma, who voted for a 25 basis-point repo rate cut at the meeting – the first such vote since May 2020. (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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