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Friday, January 27, 2023

India Gilts Review: Off lows as 5-year OIS falls from day’s highs

Informist, Wednesday, Dec 28, 2022

 

By Kasthuri Akhil

 

MUMBAI – Prices of government bonds ended off the day’s lows tracking a fall in the five-year overnight indexed swap rate, dealers said. Prices fell earlier in the day because of a sharp rise in US Treasury yields on Tuesday.

 

The 10-year benchmark 7.26%, 2032 bond ended at 99.62 rupees, or 7.31% yield, against 99.66 rupees, or 7.31% yield on Tuesday. The bond had touched a low of 99.48 rupees or 7.33% yield earlier in the day.

 

Swap rates fell today as the yield on the benchmark 10-year US Treasury note came down from the day’s high, dealers said. By the close of the gilts market, the five-year swap rate was at 6.43%, down from the day’s high of 6.52%.

 

The yield on the benchmark 10-year US Treasury note surged to 3.86% earlier in the day after closing 9 basis points higher on Tuesday at 3.84%. US Treasury yields rose as investors tried to gauge what the US Federal Reserve may do going forward, with respect to rate hikes.

 

However, the 10-year US yield later eased to 3.83%, prompting traders to receive fixed rate in the five-year OIS.

 

“Despite a surge in US yields, gilts did not see a sharp fall. The yield on the 10-year paper continues to hover around 7.32% level since three-four days,” a dealer at a state-owned bank said. “The result of today’s as well as yesterday’s (Tuesday) auctions came in better than expected which indicated there is some buying interest prevalent in the market which has kept gilts in a narrow range.”

 

The Reserve Bank of India set the cut-off yield on the 91-day T-bill at 6.31%, 6.74% on the 182-day T-bill, and 6.89% on the 364-day T-bill at the auction today. The cut-off on the 91-day T-bill was seen at 6.39%, 182-day T-bill was seen at 6.76% yield, while that on the 364-day T-bill was seen at 6.90% yield, according to an Informist poll.

 

The resurgence of COVID-19 cases around the world did not seem to have much of an impact in the domestic market as some dealers were of the view that the virus is not a threat in India. As of today, there are 3,468 active cases in the country, and the recovery rate currently was at 98.8%.

 

The market now looks forward to the new calendars for state government loans and Treasury bills, scheduled for release by the end of this week, for fresh cues.

 

While volume rose from Tuesday, it was still low as traders stayed on the sidelines due to lack of firm cues near the year-end, dealers said.

 

“Trade volume is expected to recover next week due to the end of the holiday season as market participants will join back,” a dealer at a private bank said.

 

According to data on the RBI’s Negotiated Dealing System – Order Matching platform, the turnover today was 168.65 bln rupees, compared with 135.00 bln rupees on Tuesday.

 

Meanwhile, trades aggregating 700 mln rupees were settled with the digital rupee pilot in 11 deals, compared with 950 mln rupees in 15 deals on Tuesday.

 

OUTLOOK

On Thursday, bond prices are seen steady as traders may stay on the sidelines due to lack of significant domestic cues, dealers said. Some traders may place short bets ahead of the 300-bln-rupee auction on Friday.

 

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 7.28-7.35%.

 

 

Today

Tuesday

Price

Yield

Price

Yield

7.26%, 2032

99.62007.3136%99.66007.3077%

7.38%, 2027

100.53507.2371%100.61007.2174%7.10%, 202998.90007.3179%98.95007.3078%7.54%, 2036100.89507.4321%100.87007.4351%6.54%, 203294.70007.3514%94.70757.3500%

India Gilts: Off lows tracking a fall in swap rates, US yields

 

 1420 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)99.6099.6599.4899.5499.66YTM (%)      7.31657.30967.33387.32577.3077

 

NEW DELHI–1420 IST–Prices of government bonds came off the day’s lows tracking a fall in the five-year overnight indexed swap rate, dealers said. Swap rates fell as the yield on the benchmark 10-year US Treasury note came down from the day’s high, dealers said.

 

The five-year OIS fell 4 basis points to 6.43% as traders received fixed rates noting the fall in US bond yields. The 10-year US Treasury yield came down to 3.83%, from 3.86% earlier in the day.

 

Prices fell in early trade because of a sharp rise in US yields on Tuesday. The yield on the benchmark 10-year US Treasury note rose 9 bps to 3.84% on Tuesday as investors tried to gauge what the US Federal Reserve might do going forward, with respect to rate hikes.

 

“We had anticipated the yield to rise at open, but there was hardly the case,” a dealer at a private bank said. “I think market will only become active after the state loan calendar is out and then for the CPI data next month.”

 

A large-section of the market, including foreign banks, are away right now because of quarter-end and year-end, keeping volume low, dealers said.

 

The market awaits state development loan calendar and the Treasury bill calendar, both due by the end of this week, for fresh cues. States have borrowed lower than indicative calendar in this quarter, which has helped keep a rise in gilt yields in check.

 

“If a very large SDL (state development loan calendar) comes, say above 3 trln rupees, then that would definitely be a negative for the market, and may also put pressure on the central government’s borrowing,” the dealer said.

 

According to data on the RBI’s Negotiated Dealing System, Order Matching platform, the market-wide turnover was 132.50 bln rupees at 1415 IST, compared with 77.90 bln rupees at 1330 IST on Tuesday.

 

During the day, yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.29-7.35%.  (Shubham Rana)

India Gilts: Fall amid low volume tracking overnight rise in US ylds

 

 0930 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)99.5599.5699.4899.5499.66YTM (%)      7.32397.32287.33387.32577.3077

 

MUMBAI–0930 IST–Government bond prices fell today, tracking a surge in US Treasury yields on Tuesday, dealers said. However, losses were limited as traders avoided placing large bets because of an absence of significant domestic cues.

 

“The yield on the 10-year bond is expected to rise further during the day, tracking the rise in US Treasury yields,” a dealer at a primary dealership said. “However, there will be a resistance at 7.34% level, and it will be hard to break due to lack of significant domestic cues.”    

 

The yield on the benchmark 10-year US Treasury note rose 9 basis points to 3.84% on Tuesday, against Friday’s settlement.  

 

US Treasury yields rose due to fear of a recession in the world’s largest economy as the US Federal Reserve is expected to raise rates going forward. The rising rate of COVID infections in China also contributed to the rise in US yields. Although COVID-related restrictions have been lifted in China, traders are concerned due to a rise in the number of cases. 

 

Traders now look ahead to the release of the state loan auction calendar and the Treasury bill calendar for Jan-Mar, due to be released by the end of this week, for fresh cues, dealers said.

 

Volume remained muted as traders avoided placing large bets on lack of firm cues and foreign banks are on the sidelines as they wrap up their books of accounts towards the year-end, dealers said.

 

According to data on the RBI’s Negotiated Dealing System, Order Matching platform, the market-wide turnover was 16.70 bln rupees at 0930 IST, compared with 19.85 bln rupees at 0930 IST on Tuesday.

 

During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.29-7.35%. (Anjali)

India Gilts: Seen down tracking rise in US Treasury yields on Tue

 

MUMBAI – Prices of government bonds are seen opening lower, tracking a rise in US Treasury yields on Tuesday, dealers said. The losses may, however, be limited as investors may step up purchases if the yield on the benchmark 10-year bond nears 7.35%, which is considered lucrative, dealers said. 

 

Today, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.29-7.35%, as against 7.31% on Tuesday.

 

On Tuesday, the yield on the benchmark 10-year US Treasury note rose to its highest level since Nov 15 as investors remained concerned about rate hikes dragging the world’s largest economy into recession and eyed China’s scaling back of COVID-related restrictions with caution. China easing COVID-19 curbs was seen as a potential economic boost, but traders were worried about the rising rate of infections in the world’s second-largest economy.

 

The 10-year US Treasury yield rose 9 basis points to 3.84% on Tuesday compared with Friday’s settlement. 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.

 

Today, the volume may be low, as has been the case this entire week, because foreign banks are away from the market as they close their books of account towards the year-end, dealers said. A lack of firm domestic cues may also result in traders remaining on the sidelines. (Nishat Anjum)

 

End

 

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

 

Edited by Akul Nishant Akhoury

 

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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