7.7 C
New York
Tuesday, October 4, 2022

India Gilts Review: Up as US yields fall, auction sails through

Informist, Friday, Jun 17, 2022

 

By Shubham Rana

 

NEW DELHI – Government bond prices ended sharply higher today tracking a fall in US Treasury yields and as short sellers covered their bets after the 320-bln-rupee auction result came in better than expectations, dealers said.

 

The 10-year benchmark 6.54%, 2032 bond settled at 93.22 rupees, or 7.55% yield, as against 92.76 rupees, or 7.62% yield on Thursday.

 

Traders who had placed short bets before the auction covered them after they missed out on the supply at the auction. At the auction, investors were seen picking up a large portion of the supply, which forced traders to cover short bets in the secondary market, dealers said.

 

The government had offered to sell 90 bln rupees of a new 2027 gilt, 40 bln rupees of the 2034 floating rate bond, 100 bln rupees of the 7.54%, 2036 gilt, and 90 bln rupees of the 6.99%, 2051 gilt.

 

The Reserve Bank of India set a coupon of 7.3800% on the new 2027 gilt. It set a cutoff yield of 7.0816% on the floating rate bond 2034, cutoff of 7.7826% on the 7.54%, 2036 gilt, and cutoff yield of 7.8954% on the 6.99%, 2051 gilt.

 

Gains were limited early in the trade as traders were worried the FRB 2034 may be devolved on primary dealers, a fear reflected in the high underwriting fee set for the bond.

 

“The levels where the market ended should have been there in the morning itself if there was no auction,” said a dealer at a private bank. “Once the auction result came on expected lines, prices moved higher to better reflect a sharp fall in US Treasury yields.”

 

US Treasury yields ended sharply lower on Thursday due to demand for safe haven assets following adverse US economic data.

 

Home sales in the US fell to their lowest level in a year, raising fears of recession in the world’s largest economy as the Federal Reserve hikes rates aggressively to curb soaring inflation.

 

On Wednesday, the US Federal Open Market Committee raised the federal funds rate target range by 75 basis points to 1.50-1.75% and Fed officials said they expected to hike rates by 175 bps in the rest of the calendar year.

 

After jumping to 3.45% at the end of Indian trading hours on Thursday, the yield on the 10-year benchmark US Treasury note slumped to 3.23% today.

 

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.

 

“Now that we have passed all major events including FOMC, market will move in a more stable way,” said a dealer at a state-owned bank. “This is a good level to place short bets at, but some traders may place short bets near the 7.50% level.”

 

According to data on the RBI’s Negotiated Dealing System – Order Matching platform, the market-wide turnover today was 309.65 bln rupees, compared with 293.35 bln rupees on Thursday.

 

OUTLOOK

Government bonds are not traded on Saturdays.

 

On Monday, government bonds are seen taking cues from any sharp movement in crude oil prices and US Treasury yields, dealers said.

 

Traders may avoid large bets due to lack of major domestic cues in the near term, dealers said.

 

Yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.50-7.60%.

 

 

Today

Thursday

Price

Yield

Price

Yield

5.63%, 2026

 94.8000

 7.2112%

 94.5925

 7.2734%

5.74%, 2026

 94.3700

 7.2545%

 94.1000

 7.3274%

6.67%, 2035

 91.7400

 7.6630%

 91.2500

 7.7254%

6.10%, 2031 90.6500 7.5420% 90.2500 7.6067%6.54%, 2032 93.2200 7.5460% 92.7600 7.6169%

India Gilts: Surge on better-than-expected cutoff prices at auction

 

 1445 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS6.54%, 2032PRICE (rupees)93.1393.1792.8092.9892.76YTM (%)      7.56087.55387.61147.58337.6169

 

NEW DELHI–1445 IST–Government bond prices surged after strong demand at the 320-bln-rupee auction led to higher than expected cutoff prices, dealers said.

 

Traders who missed out on the supply in the auction rushed to cover their short bets in the market after the result, dealers said.

 

The government had offered to sell 90 bln rupees of a new 2027 gilt, 40 bln rupees of the 2034 floating rate bond, 100 bln rupees of the 7.54%, 2036 gilt, and 90 bln rupees of the 6.99%, 2051 gilt.

 

At the auction, the Reserve Bank of India set a coupon of 7.3800% on the new 2027 gilt. The RBI also set 7.0816% cutoff yield on the floating rate bond 2034, 7.7826% cutoff yield on the 7.54%, 2036 gilt and 7.8954% cutoff yield at 6.99%, 2051 gilt.

 

“A single player seems to have swept the auction today,” a dealer at private bank said. “So people are covering in the market now. I think the bond prices will come lower near the end of trade today.”

 

Moreover, market sentiment was buoyed by an overnight fall in US Treasury yields as investors globally flocked to safe haven assets on fears of a recession in the US, dealers said.

 

The yield on the 10-year benchmark US Treasury note was at 3.22%, against 3.45% at the end of Indian trading hours on Thursday.

 

During the day, yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.53-7.61%.  (Shubham Rana)

India Gilts: Up on fall in US ylds; off highs ahead of auction

 

 0955 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS6.54%, 2032PRICE (rupees)92.8492.9892.8092.9892.76YTM (%)      7.60487.58337.61147.58337.6169

 

NEW DELHI–0955 IST–Government bond prices rose tracking a sharp overnight fall in US Treasury yields as investors globally flocked to safe haven assets on fears of a recession in the world’s largest economy, dealers said.

 

After jumping to 3.45% at the end of Indian trading hours on Thursday, the yield on the 10-year benchmark US Treasury note fell to 3.23% in Asian trade today.

 

However, foreign investors were risk averse and avoided piling up on domestic bonds despite a widening of the interest rate differential, dealers said.

 

Gilts were off highs as traders exercised caution ahead of the 320-bln-rupee weekly gilt auction. While demand was seen firm, investors anticipated being able to pick up dated securities at the debt sale at higher yields, dealers said.

 

Gains were also limited as overseas investors paid fixed rates in overnight indexed swap rates, limiting the fall in OIS rates despite the fall in US Treasury yields, dealers said.

 

“Short covering is lower than expected, not a lot of people are exiting short bets at these levels because OIS has been putting pressure,” a dealer at primary dealership said.

 

During the day, the yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.55-7.64%.  (Aaryan Khanna)

 

India Gilts: Seen sharply up as US yields plunge on recession fears

 

NEW DELHI – Prices of government bonds prices are seen higher today as the US Treasury yields plunged on Thursday due to demand for safe haven assets following adverse economic data in the US.

 

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.

 

Consequently, the yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.54-7.64%, as against 7.62% on Thursday.

 

Home sales in the US fell to their lowest level in a year, raising fears of recession in the world’s largest economy as the Federal Reserve hikes rates aggressively to curb soaring inflation.

 

On Wednesday, the US Federal Open Market Committee raised the federal funds rate target range by 75 basis points to 1.50-1.75% and Fed officials said they expected to hike rates by 175 bps in the rest of the calendar year.

 

The Bank of England and Switzerland’s central bank also raised policy rates on Thursday, with the accompanying dent to growth expected to threaten output across developed economies.

 

After jumping to 3.45% at the end of Indian trading hours on Thursday, the yield on the 10-year benchmark US Treasury note slumped to 3.23% in Asian trade today.

Gains, however, may be limited in domestic market as traders avoid aggressive bets ahead of the 320-bln-rupee weekly gilt auction today, but short sellers may cover their bets taken on Thursday due to the positive global cues, dealers said.

 

The government has offered to sell 90 bln rupees of a new 2027 gilt, 40 bln rupees of the 2034 floating rate bond, 100 bln rupees of the 7.54%, 2036 gilt, and 90 bln rupees of the 6.99%, 2051 gilt.

 

The auction is expected to sail through as investors look to build up their bond portfolios at high yields, dealers said. (Aaryan Khanna)

 

End

 

US$1 = 78.07 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Ashish Shirke

 

Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to [email protected]

 

© Informist Media Pvt. Ltd. 2022. All rights reserved.

Source: Cogencis

Related Articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Stay Connected

11,297FansLike
12,893FollowersFollow
748FollowersFollow
- Advertisement -

Latest Articles

Popular Articles