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India Gilts Review: Up as US ylds fall; gains limited before auction

Informist, Thursday, Jun 30, 2022

 

By Shubham Rana

 

NEW DELHI – Prices of government bonds ended slightly higher today because of a fall in US Treasury yields, crude oil prices, and the 5-year overnight indexed swap rate. However, bonds gave up some gains as traders unloaded gilts near the end of trade to make space for the fresh supply on Friday, dealers said. 

 

The 10-year benchmark 6.54%, 2032 bond settled at 93.86 rupees, or 7.45% yield, as against 93.80 rupees, or 7.46% yield on Wednesday.

 

“Today all the global factors were positive which is why bonds rose,” a dealer at a state-owned bank said. “It looks like in the end people just sold gilts before the 320-bln-rupee auction on Friday.”

 

The government has offered to sell 90 bln rupees of the 7.38%, 2027 gilt, 40 bln rupees of the 2028 floating rate bond, 100 bln rupees of the 7.54%, 2036 gilt, and 90 bln rupees of the 6.99%, 2051 gilt.

 

The 10-year US Treasury yield slumped 10 basis points on Wednesday to 3.10% as investors assessed the economic outlook after data showed US Jan-Mar GDP growth unexpectedly contracted by a revised 1.6%. The yield on the 10-year US note fell to 3.06% 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.

 

Crude prices fell on Wednesday as a rise in US fuel inventories and worries about slower economic growth globally offset concerns about tight supply of the commodity.

 

Brent crude for September delivery settled at $112.45 a bbl, and remained close to these levels today, dealers said.

 

The 5-year OIS fell to 6.88% today, against 6.96% on Wednesday, which also led to gains in bond prices, dealers said.

 

Investors stocked up on gilts today as they looked to mitigate steep valuation losses in their portfolios at the quarter-end, dealers said.

 

“Traders had hoped that prices would rise more as investors would drive up prices to protect the valuations but when prices didn’t rise much higher, traders trimmed holdings,” a dealer at a private bank said. 

 

According to data on the RBI’s Negotiated Dealing System – Order Matching platform, the market-wide turnover was 290.55 bln rupees, compared with 232.95 bln rupees on Wednesday.

 

OUTLOOK

On Friday, government bonds are seen steady on caution before the 320-bln-rupee weekly gilt auction.

 

Some traders may look to make space for the fresh supply. The government has offered to sell 90 bln rupees of the 7.38%, 2027 gilt, 40 bln rupees of the 2028 floating rate bond, 100 bln rupees of the 7.54%, 2036 gilt, and 90 bln rupees of the 6.99%, 2051 gilt on Friday.

 

Any sharp movement in crude oil prices and US Treasury yields is also likely to lend cues to the market at open.

 

Yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.40-7.50%.

 

 

Today

Wednesday

Price

Yield

Price

Yield

5.63%, 2026

 95.1400

 7.1151%

 95.1000

 7.1267%

5.74%, 2026

 94.6800

 7.1766%

 94.6200

 7.1926%

6.67%, 2035

 92.4500

 7.5739%

 92.3650

 7.5845%

7.54%, 2036 99.1800 7.6354% 99.1900 7.6342%6.54%, 2032 93.8600 7.4496% 93.8000 7.4586%

India Gilts: Stay up as investors look to mitigate quarter-end losses

 

 1350 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS6.54%, 2032PRICE (rupees)93.9794.0893.9093.9493.80YTM (%)      7.43227.41617.44347.43737.4586

 

India Gilts: Stay up as investors look to mitigate quarter-end losses

 

NEW DELHI–1350 IST–Government bond prices remained higher as investors looked to mitigate steep valuation losses in their gilt portfolios at the quarter-end, dealers said.

 

“Banks have suffered huge losses in Apr-Jun, so it is natural that they are trying to remove 2-3 basis points losses today,” a dealer at a private bank said.

 

A fall in US Treasury yields also supported domestic bond prices, dealers said.

 

The 10-year US Treasury yield slumped 10 basis points on Wednesday to 3.10% as investors assessed the economic outlook after data showed US Jan-Mar GDP growth unexpectedly contracted by a revised 1.6%. The yield on the 10-year US note fell to 3.06% today.

 

However, gains were limited ahead of the 320-bln-rupee weekly gilt auction on Friday, even as the debt sale is likely to sail through, dealers said. The government has offered to sell 90 bln rupees of the 7.38%, 2027 gilt, 40 bln rupees of the 2028 floating rate bond, 100 bln rupees of the 7.54%, 2036 gilt, and 90 bln rupees of the 6.99%, 2051 gilt.

 

During the day, yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.39-7.46%.  (Shubham Rana)

India Gilts: Up tracking slump in US yields, crude, quarter-end buys

 

 0955 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS6.54%, 2032PRICE (rupees)94.0094.0293.9093.9493.80YTM (%)      7.42807.42497.44347.43737.4586

 

NEW DELHI–0955 IST–Government bond prices rose tracking a slump in crude oil prices and US yields, prompting traders to cover their short bets in on-the-run gilts.

 

The 10-year US Treasury yield slumped 10 basis points on Wednesday to 3.10%, while Brent crude for September delivery traded below the psychologically-crucial $115-a-bbl mark in Asian trade today.

 

“Global cues are being discounted through short covering. Now let’s see if state-owned banks can do the heavy lifting to improve valuations,” a dealer at a private sector bank said.

 

Investors were cautious of stocking up on gilts noting steep valuation losses in their portfolios during the quarter after the 90 bps worth of repo rate hikes in May and June. To improve valuations at the end of the quarter, traders hoped for purchases towards the latter half of the day, dealers said.

 

Moreover, gains were limited ahead of the 320-bln-rupee weekly gilt auction of four gilts on Friday, even as the debt sale is likely to sail through, dealers said.

 

During the day, the yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.39-7.46%.  (Aaryan Khanna)

India Gilts: Seen up at quarter end tracking slump in US yields, crude

 

NEW DELHI – Prices of government bonds are seen higher at the end of the quarter ending June tracking a sharp fall in US Treasury yields and crude oil prices on Wednesday, dealers said.

 

The yield on the 10-year benchmark US Treasury note slumped 10 bps to 3.10% on Wednesday as investors assessed the economic outlook after data showed US Jan-Mar GDP growth unexpectedly contracted by a revised 1.6%.

 

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.

 

On the other hand, US Federal Reserve Chair Jerome Powell said that while there is a risk that interest rate increases could slow the economy too much, the bigger risk was persistent inflation, indicating a sharp pace of rate hikes.

 

Crude prices fell on Wednesday as a rise in US fuel inventories and worries about slower economic growth globally offset the concerns about tight crude supplies.

 

Brent crude for September delivery settled 1.3% lower on Wednesday to $112.45 a bbl, but rose to the $113-a-bbl mark in Asian trade today, which could limit the gains, dealers said.

 

Traders may cover short bets ahead of the end of the quarter today amid the benign global environment, which would help boost the valuations of their gilt portfolios, dealers said.

 

Gains may also be limited ahead of the 320-bln-rupee weekly gilt auction on Friday, particularly in the papers on offer, dealers said.

 

The government has offered to sell 90 bln rupees of the 7.38%, 2027 gilt, 40 bln rupees of the 2028 floating rate bond, 100 bln rupees of the 7.54%, 2036 gilt, and 90 bln rupees of the 6.99%, 2051 gilt.

 

Today, the yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.39-7.46%, as against 7.46% on Wednesday.  (Aaryan Khanna)

 

End

 

US$1 = 78.97 rupees

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

 

Edited by Aditya Sakorkar

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. 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.

 

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Source: Cogencis

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