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India Gilts Review: End down after fresh supply; 10-yr bonds recover

Informist, Friday, Oct 7, 2022

 

By Aaryan Khanna

 

NEW DELHI – Government bond prices ended lower as investors demanded higher yields to absorb the fresh supply of gilts at the 280-bln-rupee weekly gilt auction, dealers said. Prices on 10-year bonds recovered most losses due to firmer-than-expected demand for the 7.26%, 2032 gilt at the debt sale.

 

Today, the 7.26%, 2032 bond closed at 98.61 rupees, or 7.46% yield, as against 98.65 rupees, or 7.45% yield, on Thursday. The 6.54%, 2032 bond settled at 93.76 rupees, or 7.48% yield, against 93.80 rupees, or 7.48% yield, the previous day.

 

The government had offered to sell 70 bln rupees of the 7.38%, 2027 bond, 120 bln rupees of the 7.26%, 2032 bond, and 90 bln rupees of the 7.36%, 2052 bond today.

 

The Reserve Bank of India set a cutoff price of 98.37 rupees on the 2032 bond. The cut-off was seen at 98.24 rupees in an Informist poll.

 

Investors picked up the 10-year bond, betting that US Treasury yields may fall after the key non-farm payrolls data scheduled for release at 1800 IST, dealers said.

 

The US economy is expected to add 275,000 non-farm jobs in September, lower than the 315,000 additions in the previous month, according to a poll by The Wall Street Journal. The fall in job creation may stoke recession fears in developed economies and pull down US yields, dealers said.

Most other bonds ended sharply lower due to uncertainty about the market’s appetite for gilts, dealers said. Traders covered their short bets primarily in the 10-year bonds after the auction result, with the other cutoffs on expected lines, dealers said.

 

Some dealers were wary of higher imported inflation due to a sharp fall in the rupee’s value against the US dollar. The Indian unit fell to a record low of 82.4250-a-dollar today.

 

“It’s only the 10-year which has recovered, the other cutoffs were in line with the view, so it’s not as if demand is threatening to overwhelm the market,” a dealer at a primary dealership said.

 

Some traders were concerned of a possible devolvement in the 7.38%, 2027 bond, but mutual funds stocked up on the five-year gilt at yields considered attractive, dealers said.

 

Selling pressure continued through most of the day as market sentiment was dented by adverse global cues, and in the wake of a delay in global bond index inclusion, dealers said.

 

JPMorgan said on Tuesday that it had not included India’s sovereign debt on its bond index, following a similar decision by FTSE Russell last week. 

 

Investors cited operational hurdles that need to be resolved before India’s inclusion in the bond index for emerging market debt, JPMorgan said.

 

Domestic gilt prices were also weighed down by US Treasury yields that rose on Thursday as the US Federal Reserve officials emphasised that sharp interest rate hikes will continue, dealers said.

 

The yield on the benchmark 10-year Treasury note settled 7 basis points higher on Thursday at 3.83%, and inched higher to 3.84% by the end of Indian market hours.

 

“The market will continue to factor in US yields, that’s the only trading cue that is actually making a difference on a day-to-day basis,” a dealer at a state-owned bank said. “I think the bond index news has mostly been priced in now, especially after the auction.”

 

According to data on the Reserve Bank of India’s Negotiated Dealing System – Order Matching platform, the market-wide turnover stood at 322.15 bln rupees, compared with 274.20 bln rupees on Thursday.

 

OUTLOOK

Gilts are not traded on Saturday.

 

On Monday, government bond prices are likely to open steady as traders may stay on the sidelines at the beginning of a data-heavy week.

 

Traders will look out for the September CPI inflation prints for India and the US next week for further cues.  India will announce its inflation data on Wednesday, while the US data will be released on Thursday.

 

Traders may avoid large bets after the recent volatility amid lack of fresh domestic cues.

 

Any movement in US Treasury yields and crude oil prices may also lend cues at open.

 

The yield on the most traded 6.54%, 2032 bond is seen at 7.44-7.53%, and that on the 10-year benchmark 7.26%, 2032 bond at 7.42-7.51%.

 

 

Today

Tuesday

Price

Yield

Price

Yield

7.26%, 2032

 98.6100

 7.4596%

 98.6500

 7.4538%

7.38%, 2027

 99.9200

 7.3964%

 100.1450

 7.3389%

7.10%, 2029

 98.2300

 7.4470%

 98.4000

 7.4128%

7.54%, 2036 100.0350 7.5343% 100.3400 7.4982%6.54%, 2032 93.7600 7.4832% 93.8000 7.4763%

India Gilts: Down, 2032 gilt recovers losses after firm auction demand

 

 1435 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)98.5398.6598.2198.4598.65YTM (%)      7.47147.45387.51837.48317.4538

 

 1435 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS6.54%, 2032PRICE (rupees)93.6293.7493.3693.6093.80YTM (%)      7.50497.48647.54657.50857.4763

 

NEW DELHI–1435 IST–Government bond prices remained down but the 10-year benchmark 7.26%, 2032 gilt recovered some losses after a firmer-than-expected demand at the 280-bln-rupee weekly gilt auction today, dealers said.

 

The Reserve Bank of India set a cutoff price of 98.37 rupees on the 2032 bond. The cut-off was seen at 98.24 rupees in an Informist poll. 

 

The government had offered to sell 70 bln rupees of the 7.38%, 2027 bond, 120 bln rupees of the 7.26%, 2032 bond, and 90 bln rupees of the 7.36%, 2052 bond today.

 

Most gilts remained lower as investors demanded higher yields on the bonds at the auction, with global bond index inclusion out of the picture in the current cycle, dealers said.

 

Gilt prices also took cues from a rise in US Treasury yields on Thursday, which weighed more on domestic bonds maturing under five years.

 

The yield on the benchmark 10-year Treasury note rose by 7 basis points on Thursday to 3.83% after US Federal Reserve officials emphasised that sharp interest rate hikes will continue.

 

“The auction has gone by smoother than expected,” said a dealer at a private bank. “The buyer in the 10-year bond looks to be someone taking a punt of the US non-farm payroll data later today, rather than a state-owned bank.”

 

The US economy is expected to add 275,000 non-farm jobs in September, lower than the 315,000 additions in the previous month, according to a poll by The Wall Street Journal. The fall in job creation may stoke recession fears in developed economies and pull back US yields, dealers said.

 

Moreover, some dealers were wary of higher imported inflation due to a sharp fall in the rupee’s value against the US dollar, which weighed on gilt prices. The Indian unit fell to a record low of 82.4250-a-dollar earlier.

 

During the day, the yield on the most-traded 6.54%, 2032 bond is seen at 7.47-7.55%, while the yield on the 10-year 7.26%, 2032 bond is seen at 7.44-7.54%. (Aaryan Khanna)

India Gilts: Fall as traders make room for fresh 280-bln-rupee supply

 

 0940 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)98.3998.5098.3698.4598.65YTM (%)      7.49267.47577.49637.48317.4538

 

 0940 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS6.54%, 2032PRICE (rupees)93.5593.6093.5193.6093.80YTM (%)      7.51647.50857.52277.50857.4763

 

NEW DELHI-–0940 IST–Prices of government bonds fell sharply because of a rise in US Treasury yields and also as traders made space for a fresh debt supply today, dealers said. The yield on the 10-year benchmark bond rose to the highest level since Jun 20.

 

Appetite for gilts was subdued after JPMorgan said on Tuesday that India’s sovereign debt has not been included in its bond index for emerging markets.

 

“With JPMorgan not including Indian bonds on its index, there are no positives for the market,” a dealer at a private bank said. “While, there may be demand from state-owned banks at the auction today, what happens after the auction result would give us a better picture if demand is firm or not.”

 

The government has offered to sell 70 bln rupees of the 7.38%, 2027 bond, 120 bln rupees of the 7.26%, 2032 bond, and 90 bln rupees of the 7.36%, 2052 bond today.

 

Domestic gilt prices were also weighed down by US Treasury yields that rose on Thursday as the US Federal Reserve officials emphasised that sharp interest rate hikes will continue. The yield on the benchmark 10-year Treasury note settled 7 basis points higher on Thursday at 3.83% and stayed close to that level in Asian trade today.

 

During the day, the yield on the most-traded 6.54%, 2032 bond is seen at 7.48-7.55%, while the yield on the 10-year 7.26%, 2032 bond is seen at 7.44-7.54%. (Shubham Rana)

India Gilts: Seen down ahead of auction, rise in US yields to weigh

NEW DELHI – Prices of government bonds are seen opening lower today as traders may exercise caution ahead of the 280-bln-rupee weekly auction, dealers said. The rise in US Treasury yields on Thursday is likely to further weigh on domestic gilt prices.

 

Today, the government has offered to sell 70 bln rupees of the 7.38%, 2027 bond, 120 bln rupees of the 7.26%, 2032 bond, and 90 bln rupees of the 7.36%, 2052 bond.

 

The auction result will be key as traders try to gauge the market’s appetite for dated securities after high cutoff yields were set at the auction last week. Appetite for gilts was further hit this week after JPMorgan said on Tuesday that it had not included India’s sovereign debt on its bond index.

 

Investors cited operational hurdles that need to be resolved before India’s inclusion in the bond index for emerging market debt, according to the index review report published by the investment bank.

 

Indian bonds would remain on watch for inclusion based on investor feedback, retaining the status quo from October 2021, the report said.

 

Today, the yield on the most-traded 6.54%, 2032 bond is seen at 7.45-7.55% as against 7.48% on Thursday. The yield on the 10-year 7.26%, 2032 bond is seen at 7.42-7.52% as against 7.45% the previous day.

 

The US Treasury yields rose on Thursday as the Federal Reserve officials emphasised that sharp interest rate hikes will continue. 

 

Ahead of the key US jobs data today, the yield on the benchmark 10-year Treasury note settled at 3.83% on Thursday against Wednesday’s close of 3.76%. A rise in US Treasury yields narrows the interest rate differential between the safe-haven asset and emerging market debt, making the latter less appealing to foreign investors.

 

During the day, traders will keep an eye on US Treasury yields, crude oil prices and the overnight indexed swap rate, dealers said. (Shubham Rana)

 

End

US$1 = 82.32 rupees

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

 

Edited by Maheswaran Parameswaran

 

 

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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