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India Gilts Review:Off lows as US ylds dn, state auction demand firm

Informist, Tuesday, Nov 29, 2022

 

By Kasthuri Akhil

 

MUMBAI – Prices of government bonds recovered from the day’s lows tracking a fall in US Treasury yields from the day’s high, dealers said. Better-than-expected cutoffs at the state loan auction also aided the recovery in gilt prices.

 

The 10-year benchmark 7.26%, 2032 bond ended at 99.85 rupees, or 7.28% yield today, as against 99.89 rupees, or 7.27% yield, on Monday. The bond fell to 99.71 rupees or 7.30% yield earlier in the day.

 

The cutoff yields on states’ 10-year bonds were set at 7.60-7.62% against estimates of 7.62-7.65% in an Informist poll.

 

Prices fell in early trade as US yields and crude oil prices rose sharply, dealers said.

 

US Treasury yields rose following comments from Federal Reserve officials that indicated higher interest rate hike view over a prolonged period to tackle inflation.

 

The yield on the benchmark 10-year US Treasury note rose to 3.72% today from 3.66% at the close of Indian market hours on Monday. The 10-year US yield then came down to 3.66% at the close on Indian trading today.

 

“Crude oil still remains well below $90 per barrel which is good for the gilts,” a dealer at a private bank said. “There is always a possibility that it can go further down because of adverse conditions in China.”

 

Crude oil prices surged today on hopes that China, the world’s largest importer, would ease its strict zero-COVID policy after protests broke out against the protracted restrictions in the country. The Brent crude oil contract for February delivery rose to $86.72 per barrel from $83.89 a bbl on Monday.

 

The yield on the 10-year benchmark 7.26%, 2032 bond mostly hovered at 7.25-7.30% as the market majorly tracked movement in US Treasury yields and crude oil prices, with no other firm cues on the domestic front until the Reserve Bank of India Monetary Policy Committee’s meeting from Dec 5-7, dealers said.

 

“The 10-year benchmark bond was range bound because some primary dealerships and state-owned banks have been selling their bond holdings since the last few days at 7.25-26% yield levels which the foreign banks have been purchasing in turn,”a dealer at a state-owned bank said.  

 

Traders avoided placing large bets, primarily awaiting the RBI’s monetary policy meeting. While a rate hike of 35 basis points has been priced in by the market, traders will look at the commentary by RBI Governor Shaktikanta Das on the future path of rate hikes, dealers said.

 

According to data on the RBI’s Negotiated Dealing System – Order Matching platform, the market-wide turnover was at 236.30 bln rupees today as compared with 288.35 bln rupees on Monday.

 

Meanwhile, trades aggregating 1.30 bln rupees were settled with the digital rupee pilot in 10 deals today, against 3.25 bln rupees in 31 deals on Monday.

 

OUTLOOK

On Wednesday, government bond prices are seen opening steady due to lack of significant domestic cues.

 

Any significant movement in the 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 7.24-7.32%.

 

 

Today

Monday

Price

Yield

Price

Yield

7.26%, 2032

99.8525

7.2791%

 99.8900

 7.2736%

7.38%, 2027

100.92007.1382%

 100.9800

 7.1240%

7.10%, 2029

99.1000

7.2765%

 99.1350

 7.2695%

7.54%, 2036101.2875 7.3873% 101.3000 7.3858%6.54%, 203294.8450 7.3224% 94.9000 7.3139%

India Gilts: Dn as crude, US ylds rise; state loan sale result awaited

 

 1330 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)99.8499.8799.7199.8099.89YTM (%)      7.28137.27657.29987.28677.2736

 

MUMBAI–1330 IST–Prices of government bonds fell slightly because of a rise in crude oil prices and US Treasury yields. Traders avoided placing large bets ahead of the result of the state loan auction, which kept gilts in a thin range, dealers said.

 

The volume of trade in government securities remained low as traders stayed on the sidelines, primarily awaiting the Dec 5-7 meeting of the Reserve Bank of India’s Monetary Policy Committee. While a rate hike of 35 basis points has been priced in by the market, traders will look at the commentary by RBI Governor Shaktikanta Das on the future path of rate hikes, dealers said.

 

“The volume of government bond trades is low because the yield on the 10-year benchmark 7.26%, 2032 bond has not convincingly broken the key 7.25% level,” a dealer at a primary dealership said. “No one is willing to take any strong positions in the market until the MPC meet next week.”

 

Brent crude oil futures rose to $85.47 per barrel during the day, after ending higher on Monday at $83.89 per barrel. Crude oil prices surged today due to hope that China would relax its COVID-19 restrictions after rare protests against the country’s zero-COVID strategy.

 

Moreover, gilts moved in a narrow range tracking the movement in US Treasury yields, which were steady today, dealers said.

 

“The benchmark 10-year US Treasury yield remained in the 3.65-3.70% range over the past few days,” a dealer at a private bank said. “Only if it goes to 3.80%, the (domestic) bond market will consider it to be a negative sign.”

 

According to data on the RBI’s Negotiated Dealing System – Order Matching platform, the market-wide turnover was at 134.65 bln rupees at 1230 IST, compared with 165.85 bln rupees at 1230 IST on Monday.

 

During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.26-7.32%. (Kasthuri Akhil)

India Gilts: Fall as crude up; US ylds rise on Fed officials’ comments

 

1000 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)99.7799.8299.7199.8099.89YTM (%)      7.29117.28347.29987.28677.2736

 

MUMBAI–1000 IST–Prices of government bonds fell today tracking the rise in US Treasury yields and crude oil prices, dealers said.

 

US Treasury yields rose after Federal Reserve officials said there was a long way to go to fight inflation. The yield on the benchmark 10-year US Treasury note rose to 3.72% today from 3.66% at the close of Indian market hours on Monday.

 

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.

 

On Monday, St Louis Fed President James Bullard said the US central bank needs to raise interest rates further and then hold them there throughout next year and into 2024 to gain control of inflation and bring it back towards the Federal Reserve’s 2% goal. 

 

“Along with the US yields, the rise in crude oil prices is also weighing on the gilts. There are no significant domestic cues for the market,” a dealer at a state-owned bank said.

 

Brent crude oil futures recovered from their lowest levels in nearly a year on Monday, which further weighed on gilt prices today, dealers said. The Brent crude oil contract for February delivery ended at $83.89 per barrel on Monday, and was up at $85.45 per barrel in Asian trade today. 

 

Traders placed short bets ahead of the state loan auction today, dealers said. Nine states will raise 127 bln rupees through the sale of bonds today.

 

According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform, the market-wide turnover at 0955 IST was at 43.55 bln rupees, compared to 49.20 bln rupees at 0955 IST on Monday.

 

During the day, yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.26-7.32%.(Nishat Anjum)

India Gilts: Seen down as Fed officials’ comments push US ylds higher

 

MUMBAI – Prices of government bonds are seen opening lower today after comments from the officials of the US Federal Reserve indicating higher interest rates pushed US Treasury yields higher, dealers said.

 

Today, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.25-7.32% as against 7.27% on Monday.

 

St Louis Fed President James Bullard on Monday said the US central bank needs to raise interest rates further and then hold them there throughout next year and into 2024 to gain control of inflation and bring it back towards the Federal Reserve’s 2% goal. 

 

Meanwhile, New York Fed President John Williams did not say how fast and how long he believes rates need to be raised in the coming months, but he reckoned a rate cut is possible in 2024 as inflation pressures ease.

 

Minutes released last week from the Fed’s policy meeting in early November gave relief to global financial markets, hoping the Fed might slow early next year its fastest and most aggressive rate hiking campaign in decades. 

 

Today, the domestic market is likely to track the crude oil prices, dealers said. A fall in the Brent crude futures over last few days led to a rise in gilt prices on Monday, dealers said. Brent crude oil futures recovered from their lowest levels in nearly a year on Monday, which may weigh on gilt prices today.

 

The Brent crude oil contract for February delivery ended at $83.89 per barrel on Monday, and remained up at $84.23 per barrel in Asian trade today. (Nishat Anjum)

 

End

 

US$1 = 81.72 rupees

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

 

Edited by Aditya Sakorkar

 

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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