Informist, Monday, Oct 10, 2022
By Shubham Rana
NEW DELHI – Prices of government bonds ended off the day’s lows as short-sellers covered their bets noting firm investor demand at yields considered lucrative, dealers said.
Investors stepped up gilt purchases with the 10-year benchmark 7.26%, 2032 gilt yield touching 7.50%.
“There is firm demand from investors at the current levels which is preventing a sharp rise in yields,” a dealer at a state-owned bank said. “While the market view is that yields will rise moving ahead, investors are stocking up on gilts as soon as they find space for them.”
Today, the 7.26%, 2032 bond closed at 98.50 rupees, or 7.48% yield, as against 98.61 rupees, or 7.46% yield, on Friday. The bond fell to as low as 98.25 rupees or 7.51% during the day.
The 6.54%, 2032 bond settled at 93.58 rupees, or 7.51% yield, as against 93.76 rupees, or 7.48% yield the previous day.
Bond prices opened lower today noting a rise in US Treasury yields and crude oil prices on Friday, dealers said. Further, a rise in the overnight indexed swap rates and the rupee hitting a fresh record low pushed prices to the day’s lows.
The rupee fell to a record low of 82.6775 a dollar, as the greenback strengthened after robust US jobs data raised expectations of further aggressive rate hikes by the US Federal Reserve. However, the rupee pared losses and closed at 82.3200 a dollar today because of continuous sales of the greenback by the Reserve Bank of India.
Today, the one-year swap ended at 7.19% against Friday’s close of 7.09%, while the five-year swap rose 9 basis points to 7.05% today. Swap rates jumped today amid a slump in the rupee and a rise in US Treasury yields and crude oil prices on Friday, dealers said.
The yield on the benchmark 10-year US Treasury note jumped 6 bps on Friday to 3.89% after labour market data for September showed little signs of an economic slowdown, putting the Federal Reserve on track for aggressive rate hikes. US financial markets are closed today on account of Columbus Day.
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.
Meanwhile, Brent crude oil for December delivery jumped nearly 4% on Friday to settle at $97.92 a barrel after the Organization of the Petroleum Exporting Countries and its allies decided on an output cut.
Volumes were muted today as traders kept to the sidelines on caution ahead of the US and India CPI data releases this week, dealers said.
According to median of an Informist poll of 20 economists, India’s retail inflation rate based on CPI is expected to rise to a five-month high of 7.3% in September. Meanwhile, the US retail inflation is seen slowing to 8.1% in September, against 8.3% in August.
“US CPI will be as key for our market as domestic CPI,” a dealer at a private bank said. “If the US CPI comes in higher than expectations, then expect US rate hike view to jump further, which will then affect expectations of RBI’s rate hike view as well.”
According to data on the RBI’s Negotiated Dealing System – Order Matching platform, the market-wide turnover stood at 226.45 bln rupees, compared with 322.15 bln rupees on Friday.
OUTLOOK
Government bond prices are likely to open steady on Tuesday as traders may stay on the sidelines ahead of the US and India CPI data releases.
India will announce its inflation data on Wednesday, while the US data will be released on Thursday.
Any movement in US Treasury yields and crude oil prices may also lend cues at open.
The yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.44-7.52%.
India Gilts: Remain dn; volumes muted on caution ahead of India CPI
NEW DELHI–1410 IST–Prices of government bonds remained sharply down amid muted volumes as traders exercised caution in the run-up to the India and US CPI inflation data, due later this week.
India’s retail inflation rate based on CPI is seen rising to a five-month high of 7.3% in September, according to median of an Informist poll of 20 economists. Meanwhile, US retail inflation is seen slowing to 8.1% in September, against 8.3% in August.
“The CPI figures for both India and US will be key for the gilts market,” a dealer at a state-owned bank said. “Domestic CPI is expected to rise, so that is also being priced in by the market.”
Bond prices fell earlier in the day because of a rise in US Treasury yields and crude oil prices on Friday, dealers said. A rise in the overnight indexed swap rates also weighed on bond prices.
The one-year swap was up 15 basis points at 7.24% today, while the five-year swap rose 13 bps to 7.10%. Swap rates jumped today as the rupee slumped to the record low of 82.68 per dollar and also as US Treasury yields and crude oil prices rose on Friday, dealers said.
The yield on the benchmark 10-year US Treasury note jumped 6 bps on Friday to 3.89% after labour market data for September showed little signs of an economic slowdown, putting the Federal Reserve on track for aggressive rate hikes.
Meanwhile, Brent crude oil for December delivery jumped nearly 4% on Friday to settle at $97.92 a barrel after the Organization of Petroleum Exporting Countries and its allies decided on an output cut.
Today, the yield on the 10-year 7.26%, 2032 bond is seen at 7.47-7.53%. The yield on the 6.54%, 2032 bond is seen at 7.48-7.55%. (Shubham Rana)
India Gilts:Slump on rise in US ylds, oil prices; rupee’s fall weighs
NEW DELHI–0950 IST–Prices of government bonds slumped today tracking a rise in US Treasury yields and crude oil prices on Friday, dealers said. A fall in the rupee’s value against the dollar further weighed on gilt prices, they said.
The yield on the benchmark 10-year US Treasury note jumped 6 basis points on Friday to 3.89% after labour market data for September showed little signs of an economic slowdown, putting the Federal Reserve on track for aggressive rate hikes.
Meanwhile, Brent crude oil for December delivery jumped nearly 4% on Friday to settle at $97.92 a barrel after the Organization of Petroleum Exporting Countries and its allies decided on an output cut. Pressures from crude prices eased in trade today as the Brent contract eased towards $97 a bbl, dealers said.
However, fears of higher imported inflation persisted, with the domestic currency falling to a record low against the US unit. The rupee slumped to 82.68 per dollar earlier, before recovering most losses.
“Crude has come back into the conversation after a few days, and US yields are pressuring the curve higher across the board,” a dealer at a foreign bank said. “We are also tracking the rupee’s weakness, it is a matter of concern for the market and will obviously factor into RBI’s decision-making no matter what they say.”
Volumes were limited due to a lack of significant domestic cues and on caution ahead of the September CPI inflation prints for India and the US this week, dealers said. India will announce its inflation data on Wednesday, while the US data will be released on Thursday.
Investors stepped up purchases as the yield on the 10-year benchmark 7.26%, 2032 bond topped the psychologically-crucial 7.50% mark, dealers said.
Today, the yield on the 10-year 7.26%, 2032 bond is seen at 7.45-7.53%. The yield on the 6.54%, 2032 bond is seen at 7.48-7.55%. (Aaryan Khanna)
India Gilts: Seen down as US ylds, crude prices climb; mkt awaits CPI
NEW DELHI – Prices of government bonds are seen opening lower today taking cues from a sharp rise in US Treasury yields and crude oil prices on Friday, dealers said.
Today, the yield on the 6.54%, 2032 bond is seen at 7.45-7.55% as against 7.48% on Friday. The yield on the 10-year 7.26%, 2032 bond is seen at 7.44-7.52% as against 7.46% the previous day.
The yield on the benchmark 10-year US Treasury note jumped 6 basis points on Friday to 3.89% after labour market data for September showed little signs of an economic slowdown, putting the Federal Reserve on track for aggressive rate hikes.
US non-farm payrolls increased by 263,000 jobs in September, the Labor Department said in its closely-watched employment report on Friday. A Reuters poll of economists had projected the number at 250,000. The unemployment rate fell to 3.5% from the 3.7% in the prior month.
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.
While gilt prices had not been tracking crude closely over the past few weeks, the rise in oil futures for the fifth straight session pushed concerns over imported inflation back to the fore, particularly after the rupee hit record lows against the dollar, dealers said.
Brent futures for December delivery rose 4% on Friday to $97.92 a bbl, approaching the crucial $100-a-bbl mark. The rupee ended at a record closing low of 82.32 per dollar on Friday, hitting a fresh low of 82.43 earlier in the day.
Gilt prices had fallen on Friday following the fresh supply of 280 bln rupees. The resilience of 10-year bonds after firm demand at the weekly auction may lead to fresh short bets in that segment ahead of September inflation data to be released on Wednesday, dealers said.
Market participants expect CPI inflation reading of about 7.4% in September from 7.0% the previous month, dealers said. Such a reading would put retail inflation in Jul-Sep broadly in line with the Reserve Bank of India’s projection of 7.1% for the quarter. (Aaryan Khanna)
End
US$1 = 82.32 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Tanima Banerjee
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