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India Gilts Review:Largely unchanged on lack of triggers, low volume

Informist, Thursday, Dec 29, 2022

 

By Kasthuri Akhil

MUMBAI – Prices of government bonds ended largely unchanged today as traders kept to the sidelines due to lack of any firm cues in the market, dealers said. The price of the 10-year bond moved in a narrow range of 9 paise, an indication of how dull the market is right now.

 

The 10-year benchmark 7.26%, 2032 bond ended at 99.64 rupees, or 7.31% yield, against 99.62 rupees, or 7.31% yield on Wednesday.

 

A slight fall in the five-year overnight indexed swap rate, from the day’s highs, aided gilt prices, dealers said.

 

The five-year OIS rate fell 3 basis points to 6.40% from the day’s high by the end of trading hours in the gilts market. The one-year swap rate was at 6.72%, flat against Wednesday’s close.

 

Swap rates rose earlier in the day, which weighed on gilt prices. However, some traders received fixed rates in the five-year segment towards the close of gilts market that later pushed gilt prices up, dealers said.

 

“The market has been stagnant for most part of the day. If any change were to happen, it might happen tomorrow (Friday) ahead of the auction,” a dealer at a state-owned bank said. “Investors are not willing to invest due to low liquidity in the system.”

 

The government will sell 40 bln rupees of the 6.69%, 2024 bond; 60 bln rupees of the 7.10%, 2029 bond; 110 bln rupees of the 7.41%, 2036 bond; and 90 bln rupees of the 7.40%, 2062 bond, at the auction on Friday.

 

Some dealers expected traders to place short bets ahead of the 300-bln-rupee auction, while others did not expect any major movement in gilt prices ahead of the auction as the benchmark 10-year paper is not a part of the auction supply. In addition, the 7.41%, 2036 bond, being a new paper, gives little opportunity to traders to place short bets because of low outstanding stock in the market.

 

“There may be very limited short covering at the auction tomorrow (Friday) to cover for the few bets placed today,” a dealer at a private-bank said. “The 7.10%, 2029 bond is not that liquid and traders will start to cover the newly issued 2036 bond only after two-three more auctions.”

 

Despite a rise in the US Treasury yields, gilt prices remained unaffected during the day. The yield on the benchmark 10-year US Treasury note rose for the third consecutive day on Wednesday to touch its highest level since Nov 15 at 3.88%, up 4 basis points from Tuesday’s close. US Treasury yields rose as investors assessed the impact of China’s reopening on the Fed’s rate hike path going forward. 

 

Trade volume remained low, as has been the case this entire week, as market participants stayed away because of year-end, dealers said. Foreign banks stayed on the sidelines as they close their books of accounts by the end of calendar year, contributing to low trade volume.

 

According to data on the RBI’s Negotiated Dealing System – Order Matching platform, the turnover today was 122.95 bln rupees, compared with 168.65 bln rupees on Wednesday.

 

Meanwhile, trades aggregating 150 mln rupees were settled with the digital rupee pilot in three deals, compared with 700 mln rupees in 11 deals on Wednesday.

 

OUTLOOK

On Friday, bond prices are seen steady as traders may stay on the sidelines ahead of the 300-bln-rupee auction.

 

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

 Wednesday

Price

Yield

Price

Yield

7.26%, 2032

99.63507.3114%99.62007.3136%

7.38%, 2027

100.63007.2118%100.53507.2371%7.10%, 202998.88007.3220%98.90007.3179%7.54%, 2036100.92007.4291%100.89507.4321%6.54%, 203294.71757.3488%94.70007.3514%

India Gilts: In thin band; traders stay on sidelines on lack of cues

 

 1300 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)99.6199.6799.5899.6499.62YTM (%)      7.31477.30637.31957.31077.3136

 

MUMBAI–1300 IST–Prices of government bonds traded in a thin band as traders kept to the sidelines due to the lack of any significant cues in the market, dealers said.

 

“There’s no substantial movement in gilts today. It’s just general buying and selling that may move the prices because of low system liquidity,” a dealer at a state-owned bank said.

 

The market also looked past a rise in US Treasury yields owing largely to low trade volume and no immediate triggers on the basis of which traders could place fresh bets, dealers said.

 

Earlier in the day, some dealers were of the view that traders may place short bets ahead of the 300-bln-rupee gilts auction on Friday, which will bring down prices. However, prices continued to stay in a narrow range as the benchmark 2032 bond is not a part of the auction supply.

 

“The long-term 2036 paper at the auction tomorrow (Friday) is very new and has limited outstanding stock. Traders can’t go short on the bond because it will be too expensive to cover at the auction,” a dealer at a primary dealership said.

 

The government will sell 40 bln rupees of the 6.69%, 2024 bond; 60 bln rupees of the 7.10%, 2029 bond; 110 bln rupees of the 7.41%, 2036 bond; and 90 bln rupees of the 7.40%, 2062 bond, at the auction.

 

Trade volume remained low as a large section of the market, including foreign banks, stayed away due to it being the year-end, dealers said.

 

According to data on the RBI’s Negotiated Dealing System, Order Matching platform, the market-wide turnover was 71.75 bln rupees at 1300 IST, compared with 114.65 bln rupees at 1330 IST on Wednesday.

 

For the rest of the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.28-7.34%. (Kasthuri Akhil)

India Gilts: Steady amid low volume, lack of firm cues near year-end

 

 0935 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)99.6499.6799.6399.6499.62YTM (%)      7.31037.30637.31227.31077.3136

 

MUMBAI–0935 IST–Prices of government bonds were steady as traders avoided placing large bets amid a lack of firm domestic cues, dealers said. The volume was low due to a limited number of participants in the market. 

 

With no triggers in the market currently, traders are awaiting the release of the new calendars for state government loans and Treasury bills, scheduled to release by the end of this week, dealers said. 

 

Later today, traders may trim their holdings to make space for the fresh 300-bln-rupee supply on Friday. This might slightly weigh on gilts, dealers said. The government will sell 40 bln rupees of the 6.69%, 2024 bond; 60 bln rupees of the 7.10%, 2029 bond; 110 bln rupees of the 7.41%, 2036 bond; and 90 bln rupees of the 7.40%, 2062 bond.

 

Investors may also step up purchases near the 7.32-33% yield levels on the 7.26%, 2032 bond, a level considered lucrative, dealers said.

 

“Some people will buy at the 7.32% level and some will make space, nobody knows what to do,” a dealer at a private bank said. “Nobody is interested in the market at the moment.”

 

Traders also ignored the increase in US Treasury yields. US Treasury yields rose for the third straight day on Wednesday and touched their highest level since November as investors assessed the rising number of COVID-19 cases in China. The yield on the benchmark 10-year US Treasury note rose to 3.88% on Wednesday from 3.84% on Tuesday.

 

The volume has been very low this week and is expected to remain muted for the rest of the week as foreign banks stay on the sidelines wrapping 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 10.40 bln rupees at 0940 IST, compared with 16.70 bln rupees at 0930 IST on Wednesday.

 

During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.28-7.34%. (Anjali)

India Gilts: Seen steady on lack of cues, rise in US ylds may weigh

 

MUMBAI – Government bond prices are expected to open steady today due to lack of significant cues in the market, dealers said. A slight rise in US Treasury yields on Wednesday may weigh on gilt prices.

 

Today, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.27-7.35%, as against 7.31% on Wednesday.

 

US Treasury yields rose for the third straight day on Wednesday and touched their highest level since November, as investors assessed the impact of the reopening of China’s reopening on the Fed’s rate hike path. The yield on the benchmark 10-year US Treasury note rose to 3.88% on Wednesday from 3.84% on Tuesday.

 

Investors may step up purchases near 7.32-33% yield levels on the 7.26%, 2032 bond, considered lucrative, as has been the case in recent days, dealers said. 

 

Traders may trim holdings to make space for the fresh 300-bln-rupee supply on Friday, dealers said. The government will sell 40 bln rupees of the 6.69%, 2024 bond; 60 bln rupees of the 7.10%, 2029 bond; 110 bln rupees of 7.41%, 2036 bond; and 90 bln rupees of the 7.40%, 2062 bond.

 

Traders may avoid placing large bets as they look forward to the release of the new calendars for state government loans and Treasury bills, scheduled for release by the end of this week, dealers said.  

 

Volume is expected to remain muted for the rest of the week due to lack of firm cues and a limited number of participants in the market, dealers said. (Anjali) 

 

End

 

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

 

Edited by Maheswaran Parameswaran

 

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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