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India Gilts Review: Steady; weekly auction results fail to lend cues

Informist, Friday, Dec 23, 2022

 

By Anjali and Kasthuri Akhil

 

MUMBAI – Government bond prices ended steady as the results of the 280-bln-rupee weekly auction were along expected lines, and failed to lend fresh cues to the domestic market, dealers said.

 

The 10-year benchmark 7.26%, 2032 bond ended at 99.59 rupees, or 7.32% yield, against 99.60 rupees, or 7.32% yield on Thursday.

 

The Reserve Bank of India set the cut-off price on the 7.38%, 2027 bond at 100.57 rupees or 7.23% yield, 99.59 rupees or 7.32% yield on the 7.26%, 2032 bond; and 98.70 rupees or 7.47% yield on the 7.36%, 2052 bond.

 

Traders covered short bets on the benchmark 5-year and 10-year papers at the auction after making room on Thursday for fresh supply of the bonds, which had pulled gilt prices down sharply, dealers said.

 

Investors avoided aggressive bids due to lack of liquidity in the market at the fag end of the year, dealers said. Trade volume has been thin over the past week as market participants, particularly foreign banks, remained on the sidelines due to lack of significant cues.

 

“Auction went through only because of short covering, otherwise market seems in a dull mood,” a dealer at a private bank said.

 

Long-term investors also avoided large bets, which led to a sharp fall in the cut-off price of the 7.36%, 2052 gilt from its indicative price on Thursday. Money managers expect some outflows from their corpuses at the end of the year, dealers said.

 

Gilt prices rose slightly after the auction results, but gave up gains as traders were cautious ahead of the weekend, with prices subsiding back to a narrow band, dealers said.

 

Some traders await the release of US personal consumption expenditure data for November after market hours, dealers said. The Federal Reserve’s preferred inflation metric may lend insight into the pace of monetary policy tightening in the US, they said. 

 

The market opened seven paise lower in early trade due to jitters from a rise in US Treasury yields. However, prices recouped soon after, as traders looked past the movement in US Treasury yields as the auction neared, dealers said.

 

The yield on the benchmark 10-year US Treasury note rose to 3.69% at the beginning of trade from 3.64% at the end of Indian market hours on Thursday. US Treasury yields, including on the benchmark two-year paper, rose after the upward revision of US GDP estimate for Jul-Sep by 30 basis points to 3.2%.

 

This heightened expectations that the US Federal Reserve would continue with rate hikes, with the latest labour market data suggesting that unemployment continued to be low. Some traders await the release of US personal consumption expenditure data for November after market hours, dealers said.

 

The key inflation data is the preferred method to gauge inflation by the US Fed, but may not have a substantial impact even if inflation eases on month, as the central bank continues along its rate hike path, dealers said.

 

“We do not expect a change of stance by the Fed as inflation pressure will still be there which the Indian market has also accounted for,” the dealer quoted above said.

 

On Dec 15, the Federal Open Market Committee opted for a 50-basis-point hike in the federal funds rate to a target range of 4.25-4.50%, finally slowing the pace after four straight rate hikes of 75 bps each.

 

According to the median of the projections of US Fed officials, the policy rate is seen at 5.00-5.25% at the end of 2023.

 

Meanwhile, with no significant triggers in sight over next week, the volume is expected to be low towards the end of the year, dealers said.

 

The Indian Medical Association on Thursday released an advisory to encourage people to wear masks at public places, and avoid gatherings and overseas travel. In India, traders are cautious, anticipating the introduction of stricter COVID-19 regulations.

 

“The trade volume will remain subdued for the rest of the month due to uncertainty regarding COVID-19 cases, and its severity in different countries,” a dealer at a state-owned bank said.

 

According to data on RBI’s Negotiated Dealing System – Order Matching platform, the turnover today was 232.50 bln rupees, compared with 174.00 bln rupees on Thursday.

 

Meanwhile, trades aggregating 150 mln rupees were settled with the digital rupee pilot in three deals, compared with 850 mln rupees in 13 deals on Thursday.

 

OUTLOOK

Gilts are not traded on Saturdays.

 

On Monday, bond prices are seen steady as traders may stay on the sidelines due to lack of significant domestic cues, dealers said.

 

Volumes are expected to be dull through the week near the year-end, with foreign banks closing their books of accounts, dealers said.

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

The yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.27-7.35%.

 

 

Today

 Thursday

Price

Yield

Price

Yield

7.26%, 2032

99.59007.3179%99.60007.3164%

7.38%, 2027

100.57007.2283%100.65507.2064%7.10%, 202998.96007.3056%99.03507.2904%7.54%, 2036100.90507.4310%101.02007.4175%6.54%, 203294.64007.3602%94.73007.3453%

India Gilts: Little changed as auction cut-offs on expected lines

 

 1418 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)99.6699.6899.5299.5399.60YTM (%)      7.30807.30477.32827.32677.3164

 

MUMBAI–1420 IST–Government bond prices were little changed as the result of the 280-bln-rupee weekly auction was along expected lines, dealers said.

 

The government sold 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 from 1030 IST to 1130 IST.

 

Traders stocked up on the 5-year and the 10-year benchmark gilts at the auction, covering short bets that they had placed on Thursday to make room for the fresh supply, dealers said.

 

“Even though the auction is along the expected lines, traders would not want to carry much into the weekend,” a dealer at a state-owned bank said. “Everybody is in a holiday mood, with no triggers in sight.”

 

While the US personal consumption expenditure data for November is scheduled for release after market hours today, some dealers are of the view that the data would not make any impact on the domestic gilts. 

 

“On one hand, we have data showing inflation, making a case for rate hikes,” a dealer at another state-owned bank said. “On the other hand, we have a fear that China’s COVID-19 numbers would dent the demand for commodities like crude.”

 

“Expectations that crude oil prices will go down, would cancel any effect from inflation data,” the dealer said

 

With no significant data scheduled till next Friday, traders are expecting a dull volume in the upcoming week, dealers said.

 

According to data on the RBI’s Negotiated Dealing System, Order Matching platform, the market-wide turnover was 170.60 bln rupees at 1442 IST, compared with 110.95 bln rupees at 1430 IST on Thursday.

 

During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.29-7.36%. (Nishat Anjum)

India Gilts: In thin band ahead of auction result; demand seen firm

 

 1220 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)99.6599.6799.5299.5399.60YTM (%)      7.30997.30587.32827.32677.3164

 

MUMBAI–1210 IST–Government bond prices remained in a thin band ahead of the result of the 280-bln-rupee weekly auction, at which traders speculated firm demand near secondary market prices, dealers said.

 

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 from 1030 IST to 1130 IST.

 

Traders covered short bets at the auction after they made room on Thursday for fresh supply of the benchmark

5-year and 10-year bonds, which had pushed down prices of gilts sharply, dealers said.

 

According to 13 bond dealers polled by Informist, the Reserve Bank of India is likely to set the cut-offs for the 7.26%, 2032 bond at 99.60 rupees, or 7.32% yield; 100.57 rupees or 7.23% yield on the 7.38%, 2027 bond, and 99.68 rupees or 7.47% yield on the 7.36%, 2052 bond at the weekly auction.

 

“There should be firm demand for 10-year paper (7.26%, 2032 bond) after yesterday (Thursday),” a dealer at a private bank said. “Though the demand for longer term (7.36%, 2052 bond) will be slightly less.”

 

Investors are not seen seeking higher yields in the on-the-run gilts after displaying an appetite for the 10-year bond above the 7.32% mark earlier this week, dealers said. However, insurers, pension funds and mutual funds may avoid stocking up on gilts near the year-end, which typically sees some outflows from their investment corpuses, they said.

 

According to data on the RBI’s Negotiated Dealing System, Order Matching platform, the market-wide turnover was 106.35 bln rupees at 1220 IST, compared with 69.60 bln rupees at 1230 IST on Thursday.

 

During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.29-7.36%. (Nishat Anjum)

India Gilts: Steady; traders cautious ahead of 280-bln-rupee auction

 

 1000 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)99.6099.6099.5299.5399.60YTM (%)      7.31647.31647.32827.32677.3164

 

MUMBAI—-1000 IST—-Prices of government bonds were steady today as traders avoided large bets ahead of the 280-bln-rupee auction, dealers said.

 

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 from 1030 IST to 1130 IST.

 

Traders are expected to cover their short bets at the auction after they made room on Thursday for the fresh supply of the benchmark 2027 and 2032 bonds that feature in the debt sale, dealers said.

 

“The auction will sail through just fine, I see no hiccups,” a dealer at a state-owned bank said. “There are no major changes in the market and (it) is not expected to move much due to mixed signals.”

 

However, investors may avoid aggressive bids due to lack of liquidity in the market at the fag end of the year, dealers said. Trade volume has been thin over the past week as market participants, particularly foreign banks, remained on the sidelines due to a lack of significant cues.

 

Ahead of the auction, traders did not track the overnight movement in US Treasury yields, dealers said. The 10-year US benchmark yield rose to 3.69%, as against 3.65% at the end of Indian market hours on Thursday.

 

Some dealers also await the key US personal consumption expenditure data for November, scheduled to be released after market hours today. The data is the US Federal Reserve’s preferred method of measuring inflation.

 

Prices swung sharply in the 7.10%, 2029 bond likely on account of erroneous trade by some market participants, dealers said.

 

According to data on the RBI’s Negotiated Dealing System, Order Matching platform, the market-wide turnover was 28.80 bln rupees at 1005 IST, compared with 11.05 bln rupees at 0930 IST on Thursday.

 

During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.29-7.36%. (Kasthuri Akhil)

India Gilts: Seen steady before weekly auction; US yld rise may weigh

 

MUMBAI – Government bond prices are seen opening steady as traders may stay on the sidelines ahead of the 280-bln-rupee weekly auction, dealers said. 

 

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, yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.28-7.36%, as against 7.32% on Thursday.

 

Traders have already placed short bets on Thursday, particularly in the 2027 and 2032 gilts, and will likely cover those bets at the auction, dealers said.

 

The slight rise in US Treasury yields may weigh on gilt prices early in the day, dealers said. US Treasury yields, including the benchmark two-year paper, rose after US GDP estimate for Jul-Sep was revised 30 basis points upward to 3.2%, indicating the Federal Reserve may have more room to prolong tight monetary policy.

The 10-year US benchmark yield rose to 3.69% in Asian trade today as against 3.65% at the end of Indian market hours Thursday. A rise in US Treasury yields narrows the rate differential with the domestic bonds, making the emerging market asset less attractive.

 

Traders were cautious as discussions over possible reintroduction of stricter of COVID restrictions increased, dealers said. The Indian Medical Association released an advisory to encourage people to wear masks at public places, avoid gatherings and overseas travel. 

 

The volume is seen low until the auction result as the domestic market lacks significant cues, dealers said.  (Anjali)

End

 

US$1 = 82.86 rupees

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

 

Edited by Avishek Dutta

 

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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