22.2 C
New York
Thursday, October 6, 2022

India Gilts Review:End higher on fall in crude, US ylds ahead of CPI

Informist, Tuesday, Jul 12, 2022

 

By Aaryan Khanna

 

NEW DELHI – Government bond prices ended higher today following a sharp fall in US Treasury yields and crude oil prices during the day, buoying demand for domestic securities, dealers said.

 

The 10-year benchmark 6.54%, 2032 bond settled at 94.26 rupees, or 7.39% yield, against 94.02 rupees or 7.43% yield on Monday.

 

The yield on the 10-year US Treasury note fell 7 basis points to 2.92% by the end of Indian market hours on risk aversion by global investors, fearing an economic downturn due to sharp monetary policy tightening.

 

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.

 

US yields also fell ahead of Wednesday’s CPI data, which could determine the pace of the US Federal Reserve’s rate hikes. Economists have forecast that year-on-year CPI will hit a fresh 40-year high of 8.8% in June, according to a poll by Reuters.

 

Crude oil prices slumped on fears of demand destruction due to possible recession in developed economies as well as rising daily COVID-19 cases in China, the world’s second-largest economy.

 

Brent crude for September delivery fell by over $2 intraday to $104.90 a barrel by the end of Indian market hours.

 

The five-year overnight indexed swap rate also plunged 13 bps to 6.59% today, further aiding gilt prices, as overseas investors received fixed rates tracking global cues, dealers said.

 

However, gains were limited ahead of the CPI data. Retail inflation is expected to top the Reserve Bank of India’s medium-term target band of 2-6% for the sixth straight month. Dealers avoided aggressive bets before the inflation.

 

India’s retail inflation is seen at 7.0% in June against 7.04% in May as duty cuts on several items may offset the impact of rise in prices of food and some other items, according to an Informist poll of 19 economists.

 

“It was difficult to ignore such a sharp move in US yields, even though (CPI) data is yet to come,” a dealer at a private bank said.

 

“The market made inroads even into 7.40% (yield on the 10-year benchmark), where there is a strong tendency from both traders and investors to book profits,” the dealer said.

 

Gilt prices had slipped into the red during the day on caution before the CPI print and because of fresh short bets ahead of the 320-bln-rupee weekly gilt 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 2028 bond was seen particularly out of favour, after the RBI devolved 9.72 bln rupees of the gilt at its previous auction on Jul 1, dealers said.

 

Some traders were also wary that the sharp fall in the rupee may force the RBI to hike the repo rate by 50 bps and announce other policy tightening measures at its policy review in August to prevent flight of capital, dealers said.

 

The rupee fell to a record low of 79.66 against the greenback today because the dollar index surged to a fresh near two-decade high, dealers said.

 

“There are plenty of risks still facing us in the August policy, but nothing is set in stone yet. At least CPI will lend clarity on how this week’s auction will fare,” a dealer at a primary dealership said.

 

OUTLOOK

On Wednesday, government bond prices may take cues from domestic CPI for June that will be released at 1730 IST today.

 

India’s retail inflation is seen at 7.0% in June, steady against 7.04% in May, as duty cuts on several items may offset the impact of rise in prices of food and some other items, according to a poll by Informist.

 

Gilt prices may remain under pressure due to concern that bond portfolios of investors may be nearing capacity, following muted demand for dated securities over the past two weekly gilt auctions, dealers said.

 

Overnight indexed swaps are seen steady due to lack of significant domestic cues on interest rates.

 

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

 

The yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.40-7.48%.

 

 

Today

Monday

Price

Yield

Price

Yield

5.63%, 2026

 95.4500

 7.0285%

 95.3500

 7.0592%

5.74%, 2026

 95.0000

 7.0961%

 94.8200

 7.1458%

6.67%, 2035

 92.7300

 7.5395%

 92.5225

 7.5656%

7.54%, 2036 99.5800 7.5878% 99.3500 7.6151%6.54%, 2032 94.2550 7.3915% 94.0200 7.4275%

India Gilts: Rise as crude, US yields plunge; Jun CPI print eyed

 

 1420 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS6.54%, 2032PRICE (rupees)94.1494.2293.8894.2094.02YTM (%)      7.40927.39657.44937.40007.4275

 

NEW DELHI–1420 IST–Government bond prices rose as crude oil prices and US Treasury yields plunged, even as traders were cautious about taking large bets ahead of the June CPI print, dealers said.

 

Globally, investors avoided risky assets on fears of an economic downturn from sharp policy tightening by the central bank to curb inflation.

 

Brent crude for September delivery traded nearly 2.5% lower at $104.60 a bbl today, while the yield on the 10-year US Treasury note slumped 7 basis points to 2.92%.

 

Gains were limited ahead of the CPI release, with retail inflation expected to top the Reserve Bank of India’s medium-term target band of 2-6% for the sixth straight month.

 

Consumer inflation is seen at 7.0% in June, against 7.04% in May, according to an Informist poll.

 

“Before the CPI (release), the only triggers are global which is where the traders are coming in to the market, otherwise it’s a quiet day as we are waiting for the number,” a dealer at a state-owned bank said.

 

“There are not really favourable levels to buy, and no one will go long before CPI comes,” the dealer 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: Reverse gains as traders place short bets before CPI

 

 1000 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS6.54% 2032PRICE (rupees)93.9994.2293.9594.2094.02YTM (%)      7.43237.39657.43857.40007.4275

 

NEW DELHI–1000 IST–Government bond prices erased early gains as traders placed short bets ahead of the release of the June CPI inflation print after market hours today, dealers said.

 

According to a poll of 19 economists by Informist, India’s retail inflation based on the Consumer Price Index is seen at 7.0% in June, flat from 7.04% in May, as duty cuts on several items may offset the impact of rise in prices of food and some other items.

 

The National Statistical Office is scheduled to release inflation data for June at 1730 IST today.

 

Bond prices rose earlier because of a fall in US Treasury yields on fears of an economic recession, dealers said.

 

US Treasury yields fell sharply on Monday in choppy trade owing to safe-haven demand. This followed a sell-off in equities, driven by concerns that earnings could be hurt.

 

The yield on the 10-year benchmark US Treasury note fell to 2.99% on Monday ahead of Wednesday’s US consumer price index data, which could determine the pace of the US Federal Reserve’s rate hikes. Economists estimate that the year-on-year CPI will hit a fresh 40-year high of 8.8% in June, according to a Reuters poll.

 

Some traders were also wary that the sharp fall in the rupee may force the Reserve Bank of India to hike interest rates by more than 50 bps in its August Monetary Policy Committee meeting, dealers said. 

 

The rupee fell to a record low against the greenback today because the dollar index surged to a fresh near two-decade high, dealers said.

 

“Dealers have been saying for weeks now that the depreciating rupee is a negative for the bond market,” a dealer at a private bank said. “It looks like people are finally reacting to the rupee’s fall in the market.”

 

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

India Gilts: Seen up as US yields fall; India June CPI data in focus

 

NEW DELHI – Prices of government bonds may open higher today because of a sharp overnight fall in US Treasury yields, dealers said. However, traders may avoid aggressive bets ahead of the release of the June CPI inflation print after market hours today.

 

India’s retail inflation is seen at 7.0% in June, steady against 7.04% in May, as duty cuts on several items may offset the impact of rise in prices of food and some other items, according to an Informist poll of 19 economists.

 

The yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.38-7.46%, as against 7.43% on Monday.

 

US Treasury yields fell sharply on Monday in choppy trading owing to safe-haven demand amid a sell-off in equities driven by growth concerns that could hurt earnings.

 

The yield on the 10-year benchmark US Treasury note fell to 2.99% on Monday ahead of Wednesday’s US consumer price index data, which could determine the pace of the US Federal Reserve’s rate hikes. Economists forecast that the year-on-year CPI will hit a fresh 40-year high of 8.8% in June, according to a Reuters poll.

 

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.

 

Traders will also keep an eye on the movement in crude oil prices during the day for more cues, dealers said.

 

The Brent crude oil contract for September delivery ended at $107.10 per barrel on Monday. (Shubham Rana)

 

End

 

US$1 = 79.60 rupees

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

 

Edited by Ashish Shirke

 

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.

 

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

11,294FansLike
12,893FollowersFollow
748FollowersFollow
- Advertisement -

Latest Articles

Popular Articles