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India Gilts Review: Fall before off-cycle MPC; rise in US ylds weighs

Informist, Monday, Oct 31, 2022

 

By Shubham Rana and Anjali

 

MUMBAI/NEW DELHI – Prices of government bonds ended sharply lower today as traders maintained caution ahead of the off-cycle Monetary Policy Committee meeting on Thursday, dealers said. rise in US Treasury yields today further weighed on gilt prices. 

 

The 10-year benchmark 7.26%, 2032 bond closed at 98.71 rupees, or 7.45% yield, against 98.91 rupees, or 7.42% yield, on Friday.

 

The Reserve Bank of India’s rate-setting panel is scheduled to meet on Thursday under Section 45ZN of the RBI Act, 1934, which pertains to drafting a report to the government on the central bank’s failure to meet its inflation targeting mandate.

 

While the rate-setting panel is not expected to raise any rates, traders are staying on the sidelines ahead of the meeting, dealers said. The last time the committee met outside the scheduled six meetings was in May, when the repo rate was hiked by 40 basis points on May 4. 

 

“Even if the RBI explicitly says there is not going to be a rate hike, there is always a jitter in the mind of the trader: What if?” a dealer at a primary dealership said.

 

The timing of the meeting is considered to be the key cause for concern because it will follow the US Federal Reserve’s policy review outcome scheduled after market hours on Wednesday, dealers said.

 

Ahead of the key meet, traders took cues from global triggers. Gilt prices fell due to a rise in US Treasury yields before the Federal Open Market Committee’s meeting on Wednesday.

 

The yield on the benchmark 10-year US Treasury note rose 6 basis points on Friday to 4.02%, and the yield further rose to 4.07% during the day today. 

 

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.

 

Trade volumes were dismal today, with the market-wide turnover below the 200-bln-rupee mark for the second straight session.

 

According to data on RBI’s Negotiated Dealing System – Order Matching platform, the market-wide turnover was at 175.90 bln rupees, compared with 182.45 bln rupees on Friday.

 

The two key monetary policy meetings are keeping traders on the sidelines with volumes expected to jump post the outcomes of the meetings, dealers said.

 

“Right now, no one would want to hold a large position, neither long, nor short,” a dealer at a private bank said. “What people are doing is running small short positions, because of the uncertainty around the MPC meeting.”

 

OUTLOOK

Gilt prices may open steady on Tuesday as traders may keep to the sidelines due to caution ahead of the Monetary Policy Committee’s off-cycle meeting Thursday and the US Federal Reserve’s meeting Wednesday, dealers said.

 

Traders may take cues from any sharp movement in US Treasury yields and crude oil prices at open.

 

The yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.38-7.45%.

 

 

Today

Friday

Price

Yield

Price

Yield

7.26%, 2032

 98.7100

 7.4454%

 98.9100

 7.4161%

7.38%, 2027

 99.9950

 7.3779%

 100.1400

 7.3404%

7.10%, 2029

 98.3400

 7.4272%

 98.5100

 7.3932%

7.54%, 2036 100.0200 7.5367% 100.3000 7.5034%6.54%, 2032 93.8200 7.4781% 93.9900 7.4510%

India Gilts: Falls more on weak demand ahead of MPC; US ylds weigh

Informist, Monday, Oct 31, 2022

 

 1415 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)98.6998.9298.6598.8998.91YTM (%)      7.44837.41467.45387.41907.4161

 

 

India Gilts: Falls more on weak demand ahead of MPC; US ylds weigh

 

MUMBAI–1415 IST–Prices of government bonds fell further as traders avoided buying gilts due to caution ahead of the Reserve Bank of India’s off-cycle Monetary Policy Committee’s meeting scheduled on Thursday, dealers said.

 

“The market is down today because of the event (domestic policy meet) this week. Today, the trade volume is also light because of it,” said a dealer at a state-owned bank.

 

According to data on RBI’s Negotiated Dealing System – Order Matching platform at 1400 IST, the market-wide turnover stood at 141.15 bln rupees.

 

While the rate-setting panel is not expected to change the policy repo rate, traders looked to limit their exposure to the outcome as they are uncertain whether Monetary Policy Committee members would offer an outlook for growth and inflation, dealers said.

 

This is the first time that the committee will meet under Section 45ZN of the RBI Act, 1934, which pertains to drafting a report to the government on the RBI’s failure to meet its inflation targeting mandate.

 

Ahead of the key meet, traders took cues from global triggers. Gilt prices fell due to a rise in US Treasury yields before the Federal Open Market Committee’s meeting on Wednesday.

 

The 10-year US Treasury yield jumped 6 basis points on Friday to 4.04%. 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.

 

“The Fed is expected to raise rates by 75 bps this week, which has largely been factored in the prices of domestic bonds,” a dealer at a primary dealership said. “Their view on the future rate hikes would move the market.”

 

Losses were limited as investors believed that the 10-year benchmark bond was a lucrative buy when its yield rose past 7.45%, dealers said.

 

During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.41-7.46%. (Nishat Anjum)

India Gilts: Fall as US yields rise ahead of FOMC; MPC meet eyed

 

 1005 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)98.7798.9298.7598.8998.91YTM (%)      7.43667.41467.43957.41907.4161

 

MUMBAI–1005 IST–Prices of government bonds fell as US Treasury yields rose ahead of the outcome of the Federal Open Market Committee meeting scheduled on Wednesday, dealers said.

 

Yield on the benchmark 10-year US Treasury note rose 6 basis points on Friday to 4.02%, after data last week showed that inflation remained high in the US.

 

US personal consumption expenditure inflation, the Fed’s preferred measure of price increases, was at 6.2% on year in September, unchanged from the previous month.

 

The Fed is widely expected to raise rates by 75 bps this week for the fourth consecutive meeting, which has largely been factored in the prices of domestic bonds, dealers said.

 

“Prices are down because of a rise in the US Treasury yields,” a dealer at a private bank said. “The movement in gilts today will be lacklustre since there is no news other than the Federal Open Market Committee and Monetary Policy Committee meet.”

 

Even though the uncertainty over the off-cycle rate hike by the Reserve Bank of India’s Monetary Policy Committee meeting has faded, market participants are wary of stocking up on gilts, dealers said.

 

Any commentary of the pace of growth and inflation at the outcome of the meet will be keenly eyed, dealers said.

 

The one-day meeting on Thursday will be held under Section 45ZN of the RBI Act, 1934, which pertains to drafting the committee’s report to the government on failure to meet the inflation targeting mandate. 

 

During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.39-7.45%.  (Nishat Anjum)

India Gilts: Seen dn on rise in US ylds; caution before policy meets

 

NEW DELHI – Prices of government bonds are expected to open lower today tracking a rise in US Treasury yields, dealers said.

 

The fall may be limited on caution ahead of the US Federal Reserve’s meeting scheduled on Wednesday followed by an off-cycle meeting of the Monetary Policy Committee on Thursday, dealers said.

 

Today, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.38-7.45% as against 7.42% on Friday.

 

Data last week showed that inflation pressures remain elevated in the US, suggesting that the Federal Reserve will move forward with its aggressive interest rate hiking cycle. The Fed is widely expected to raise rates by 75 bps at the upcoming meet on Wednesday.

Yield on the benchmark 10-year US Treasury note rose 6 basis points on Friday to 4.02%, and was at 4.04% in Asian trade today. 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, uncertainty over the Monetary Policy Committee meeting had faded, with market participants not expecting an unscheduled rate increase. However, any commentary of the pace of growth and inflation at the outcome of the meet is keenly eyed, dealers said.

 

The one-day meeting on Thursday will be held under Section 45ZN of the Reserve Bank of India Act, 1934, which pertains to drafting the committee’s report to the government on failure to meet the inflation targeting mandate.  (Anjali)

 

End

 

US$1 = 82.78 rupees

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

 

Edited by Tanima Banerjee

 

 

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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