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Wednesday, August 10, 2022

India Gilts Review: End off lows as crude, US ylds erase early gains

Informist, Tuesday, Jul 5, 2022

 

By Shubham Rana

 

NEW DELHI – Government bond prices ended off lows today as crude oil prices and US Treasury yields erased early gains and came down during the day, dealers said. 

 

The 10-year benchmark 6.54%, 2032 bond settled at 94.25 rupees or 7.39% yield, as against 94.36 rupees, or 7.37% yield on Monday.

 

Traders tracked crude oil prices and US Treasury yields aggressively today amid a lack of significant domestic cues, dealers said.

 

“When you don’t have a big domestic reason for bonds, this (bonds tracking global factors) is bound to happen,” a dealer at a private sector bank said. “Traders are looking even at the smallest of movements in US yields and crude.”

 

Bond prices fell sharply earlier in the day as the yield on the 10-year US Treasury note approached the key 3% mark and crude oil prices were close to $114 per barrel.

 

The yield on the 10-year US Treasury note rose sharply ahead of the minutes of the meeting of the Federal Open Market Committee, set to be released after market hours on Wednesday. The 10-year US Treasury yield closed at 2.88% on Friday.

 

US Treasury notes were not traded on Monday as financial markets in the US were shut for Independence Day, while price settlement for crude oil did not take place either.

 

Brent crude for September delivery jumped on fresh concerns over supply from major oil producers.

 

However, during the day both crude oil prices and US Treasury yields came down from the day’s highs, which led to some relief in domestic bond prices, dealers said.

 

The yield on the 10-year US yield fell below the 2.90% mark while crude prices fell below $112 a bbl.

 

The 10-year 2032 bond suffered the biggest loss today as traders placed fresh short bets ahead of the 330-bln-rupee auction on Friday.

 

The government has offered to sell 40 bln rupees of a 6.69%, 2024 gilt, 70 bln rupees of the 7.10%, 2029 bond, 130 bln rupees of the 6.54%, 2032 gilt, and 90 bln rupees of the 6.95%, 2061 gilt on Friday.

 

Trade volumes, which were muted earlier in the day, increased after the result of the state loan auction came on expected lines, dealers said.

 

The Reserve Bank of India set the cutoff yield on states’ 10-year bonds at 7.82%. Eight states raised 135 bln rupees through the sale of securities today. 

 

The state bond auctions in Jul-Sep are seen playing an important part in where the gilt yields will go, dealers said.

 

“Today the states auction result was on expected lines but going ahead what happens to state loans will also tell us what will happen to government bonds,” a dealer at another private sector bank said.

 

States are set to borrow 2.12 trln rupees through the sale of bonds in Jul-Sep, compared to 1.10 trln rupees raised in Apr-Jun. 

 

According to data on the RBI’s Negotiated Dealing System – Order Matching platform, the market-wide turnover was 284.40 bln rupees, compared with 320.50 bln rupees on Monday.

 

OUTLOOK

Government bond prices are likely to open steady on Wednesday on caution ahead of the US Federal Open Market Committee minutes for its June meeting.

 

Any overnight movement in crude oil prices and US bond yields may also lend early cues to domestic bonds.

 

During the day, bonds may trade within a narrow range in the likely absence of fresh domestic cues. Traders may be wary of making large purchases if the 10-year benchmark bond yield slips below the 6.35% mark. 

 

Traders may trim their holdings to make room for the fresh supply at the weekly gilt auction on Friday, dealers said.

 

Yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.35-7.44%.

 

 

Today

Monday

Price

Yield

Price

Yield

5.63%, 2026

 95.3900

 7.0409%

 95.4500

 7.0211%

5.74%, 2026

 94.9650

 7.1007%

 95.0000

 7.0902%

6.67%, 2035

 92.8400

 7.5251%

 92.8000

 7.5301%

7.54%, 2036 99.6000 7.5856% 99.6300 7.5821%6.54%, 2032 94.2500 7.3907% 94.3600 7.3736%

India Gilts: Off lows as US yields come down; rise in crude weighs

 

 1420 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS6.54% 2032PRICE (rupees)94.2794.2894.0694.1594.36YTM (%)      7.38767.38687.41997.40617.3736

 

NEW DELHI–1420 IST–Prices of government bonds were off lows as US Treasury yields retreated from the day’s high, dealers said. However, a rise in crude oil prices weighed on domestic bonds, they said.

 

Bond prices fell sharply earlier in the day as the yield on the 10-year US Treasury note approached the key 3% mark, ahead of the minutes of the meeting of Federal Open Market Committee, set to be released after market hours on Wednesday. The 10-year US Treasury yield closed at 2.88% on Friday.

 

“US yields have come down from morning, which is why there is some recovery in the market,” a dealer at a state-owned bank said. “Our market is exclusively tracking US yields and crude prices as there are no domestic factors to guide right now.”

 

Brent crude for September delivery also rose to $113.50 a bbl, up 1.5% from Friday’s close, on fresh concerns over supply from major oil producers.

 

Trade volumes, which were muted earlier in the day, increased after the result of the state loan auction came on expected lines, dealers said.

 

The Reserve Bank of India set the cutoff yield on states’ 10-year bonds at 7.82%. Eight states raised 135 bln rupees through sale of securities today. 

 

During the day, yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.37-7.43%. (Shubham Rana)

India Gilts: Slump as 10-year US yield near 3%, crude prices jump

 

  0955 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS6.54%, 2032PRICE (rupees)94.0994.1794.0694.1594.36YTM (%)      7.41537.40307.41997.40617.3736

 

NEW DELHI–0955 IST–Prices of government bonds were down sharply due to a steep rise in US Treasury yields. The sentiment was weighed down further by an increase in crude oil prices, dealers said.

 

The yield on the 10-year US Treasury note approached the key 3% mark, up from 2.88% on Friday, ahead of the minutes of the Federal Open Market Committee, set to be released after market hours on Wednesday.

 

Meanwhile, Brent crude for September delivery also rose to $113.50 a bbl, 1.5% higher than Friday’s close, on fresh concerns over supply from major oil producers.

 

US Treasury notes were not traded on Monday as financial markets in the US were shut for Independence Day. Price settlement for crude oil did not take place either.

 

Gilt prices also fell as traders paid fixed rates in overnight indexed swaps, particularly on the five-year contract, dealers said. The five-year OIS rose 8 basis points to 6.85%.

 

“While crude is something that is broadly priced in, overseas paying in OIS is heavily dependent on US yields, which are again showing some caution as the minutes are expected to be hawkish, considering that there was a 75-basis-point rate hike,” a dealer at a private bank said.

 

During the day, yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.37-7.45%.  (Aaryan Khanna)

India Gilts: Seen lower as crude oil prices, US yields surge

 

NEW DELHI – Government bonds are seen opening lower tracking a sharp rise in crude oil prices and US Treasury yields, dealers said.

 

Crude oil prices rose on Monday as growing supply concerns on account of lower output from Organization of Petroleum Exporting Countries, unrest in Libya, and sanctions against Russia offset fears of a global recession.

 

Meanwhile, yield on the 10-year US Treasury note rose to 2.97% in Asian trade today as investors globally eyed the sharp pace of rate hikes the US Federal Reserve is likely to undertake to bring inflation under control.

 

US Treasury notes were not traded on Monday as financial markets in the US were shut for Independence Day, while price settlement for crude oil did not take place either.

 

The Brent crude oil contract for September delivery rose to $113.52 a barrel from $111.63 a bbl on Friday.

 

Traders may avoid large bets due to a lack of significant domestic cues. They also await the release of the minutes of the US Federal Open Market Committee’s June meeting, after market hours on Wednesday, for triggers, dealers said.

 

Today, yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.37-7.45%, as against 7.37% on Monday.  (Aaryan Khanna)

 

End

 

US$1 = 79.37 rupees

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

 

Edited by Michael Correya

 

 

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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