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Friday, February 3, 2023

India Gilts Review:Dn as 5-yr OIS up; firm auction demand limits loss

Informist, Friday, Dec 30, 2022

 

By Kasthuri Akhil and Anjali

 

MUMBAI – Most government bond prices ended lower on the last trading day of 2022, tracking a rise in the five-year overnight indexed swap rate, dealers said. The bonds at 300-bln-rupee auction recovered some losses after firmer-than-expected cut-off prices, dealers said. 

 

The 10-year benchmark 7.26%, 2032 bond ended at 99.53 rupees, or 7.33% yield, against 99.64 rupees, or 7.31% yield on Thursday.

 

The benchmark five-year and 10-year papers fell more as these were not in the 300-bln-rupee auction today, dealers said. The five-year swap rate rose 3 basis points from Thursday’s close to 6.46%.

 

Swap rates rose because of a rise in US Treasury yields, dealers said. The yield on the benchmark 10-year US Treasury note rose to 3.86% today, against 3.83% on Thursday.

 

Prices were in a thin band in early trade as traders avoided large bets before the auction result, dealers said. After the auction, the bonds on sale today recovered as cut-offs came in line with expectations.

 

The government sold 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 and 90 bln rupees of the 7.40%, 2062 bond.

 

Bidding time for the gilt auction was extended to 1200 IST from the scheduled 1030-1130 IST due to a series of technical snags on the E-Kuber platform, where traders place their bids, dealers said. Primary dealers were unable to access the official underwriting reports, though they could see their own underwriting allocations on the platform, dealers said.

 

“The auction cut-off was the only positive cue, but it was overshadowed by the rise in swap rates,” a dealer at a state-owned bank said. “Post the auction result, traders now lack significant cues.”

Moreover, Brent crude contract for March delivery fell to $83.46 rupees per barrel on Thursday from $83.99 rupees per bbl on Wednesday.

 

Traders are not paying heed to overseas cues because of limited participation in the domestic market as the year draws to a closedealers said. 

 

According to data on the RBI’s Negotiated Dealing System – Order Matching platform, the turnover today was 280.30 bln rupees, compared with 122.95 bln rupees on Thursday.

 

Meanwhile, trades aggregating 350 mln rupees were settled with the digital rupee pilot in seven deals, compared with 150 mln rupees in three deals on Wednesday.

 

TREASURY BILL CALENDAR

While the Treasury bill calendar for Jan-Mar did not impact the gilts market, some dealers were of the view that yields on the T-bills are expected to rise due to high debt supply in the Treasury bill calendar released on Thursday.

 

According to the new calendar for auction of Treasury bills, the government is looking to borrow 3.8 trln rupees in Jan-Mar. Of the total, the government will sell 910 bln rupees of 91-day T-bills, 1.59 trln rupees of 182-day T-bills, and 1.30 trln rupees of 364-day T-bills, the release said.

 

In Oct-Dec, the Centre sold 2.86 trln rupees of T-bills through 1.30 trln rupees of 91-day T-bills and 780 bln rupees each of the 182-day and 364-day T-bills.

 

The government likely had to push up T-bill issuances due to the large quantum of redemptions in Jan-Mar, which would have eaten into its cash balance, dealers said. In Jan-Mar, a total of 1.91 bln rupees is due for redemption in the 91-day T-bill segment; 182-day T-bills worth 1.14 trln, and 1.68 trln in the 364-day T-bills are due for redemption. The total redemption amounts to 4.73 trln rupees.

 

With this, the Centre’s net T-bill issuances for 2022-23 (Apr-Mar) were more than double the budgeted amount of 500 bln rupees.

 

Traders had expected the government to borrow more in the 91-day segment before the release, dealers said. However, the 182-day segment saw the highest issuance amount in the calendar, which is expected to push yields up and closer to that on the 364-day T-bill.

 

“They had room to borrow more in the 91-day segment, where mutual funds are active, so it strange they’ve only increased supply in the 182-day segment,” a dealer at private bank said.

 

OUTLOOK

Gilts are not traded on Saturday.

 

On Monday, bond prices are seen steady as traders may stay on the sidelines due to lack of significant cues, dealers said. Market awaits the release of the state development loan calendar, expected to be released later today, for fresh cues.

 

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

99.52507.3277%99.63507.3114%

7.38%, 2027

100.56507.2287%100.63007.2118%7.10%, 202998.91757.3146%98.88007.3220%7.54%, 2036100.87507.4343%100.92007.4291%6.54%, 203294.60007.3679%94.71757.3488%

India Gilts: Fall as 5-yr OIS rate up despite firm auction result

 

 1505 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)99.5599.6599.4899.6499.64YTM (%)      7.32477.30937.33437.31087.3114

 

MUMBAI–1505 IST–Prices of most government bonds remained down, tracking a rise in the five-year overnight indexed swap rate, dealers said. The firm demand, as seen by cut-off prices at the 300-bln-rupee weekly auction, failed to lend positive triggers to on-the-run gilts, dealers said.

 

The five-year swap rate rose 4 basis points from Thursday’s close to 6.47%. Subsequently, traders trimmed their gilt holdings in the five-year benchmark 7.38%, 2027 bond and the 10-year benchmark 7.26%, 2032, which fell the most, dealers said.

 

Meanwhile, the bonds at the auction recovered some losses after firmer-than-expected cut-off prices at the 300-bln-rupee auction, dealers said. The 7.10%, 2029 bond erased losses and was slightly higher than the previous close.

 

The government sold 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 and 90 bln rupees of the 7.40%, 2062 bond from 1030 IST to 1200 IST. Some dealers speculated that long-term investors such as insurers and pension funds kept to the sidelines during the auction bidding, which pulled down the prices of the 2036 and 2062 bonds in the secondary market as well.

 

“The market was expecting a tail on the long-term paper, but during the auction, we saw demand from nationalised banks,” said a dealer at a state-owned bank.

 

The Reserve Bank of India set a cut-off price of 98.85 rupees for the 2029 bond, in line with the median estimate in a poll by Informist. The 2036 bond saw a cut-off price of 99.85 rupees against an expectation of 99.80 rupees.

 

After the auction cut-off, the market again had no positive triggers and traders avoided adding to their gilt portfolios into the weekend, dealers said.

 

According to data on the RBI’s Negotiated Dealing System, Order Matching platform, the market-wide turnover was 237.20 bln rupees at 1430 IST, compared with 84.40 bln rupees at 1430 IST on Thursday.

 

For the rest of the day, yield on the 10-year benchmark 7.26%, 2032 bond is seen in the range of 7.27-7.34%. (Nishat Anjum)

India Gilts: Down as long-term investors on sideline at auction

 

 1245 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)99.5499.6599.5299.6499.64YTM (%)      7.32627.30937.32847.31087.3114

 

MUMBAI—-1245 IST—-Prices of government bonds fell as dealers speculated traders placed weak bids for the recently issued 14-year bond and demanded higher yields for the paper at the 300-bln-rupee auction.

 

The government offered to 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. 

 

Bidding time for the gilt supply was extended to 1200 IST from the scheduled 1030-1130 IST due to a series of technical snags on the E-Kuber platform, where traders place their bids, dealers said. Primary dealers were unable to access the official underwriting reports, though they could see their own underwriting allocations on the platform, dealers said.

 

“We couldn’t access the official underwriting allotment reports, which may be due to some technical issue,” a dealer at a primary dealership said.

 

Despite the issue persisting, the Reserve Bank of India did not extend the bidding time past 1200 IST, dealers said.

 

Gilts fell as long-term investors stayed on the sidelines near the year-end, dampening market appetite for the 7.41%, 2036 paper and 7.40%, 2062 papers particularly in the extended bidding hours, dealers said.

 

“There might be some tail in 14-year and long term paper as those who usually invest in longer-term papers are absent from the auction,” a dealer at a private bank said.

 

A tail refers to the difference between the bid price for the gilts at the primary issuance and the secondary market price.

 

Trade volume picked up unlike the past week as traders had placed short bets before the auction, dealers said.

 

The 7.41%, 2036 paper was the second-most traded paper during the day. Traders had placed short bets in the old 7.54%, 2036 paper due to its large outstanding and stepped up purchases in the new on-the-run gilt, dealers said.

 

According to data on the RBI’s Negotiated Dealing System, Order Matching platform, the market-wide turnover was 160.45 bln rupees at 1245 IST, compared with 62.35 bln rupees at 1230 IST on Thursday.

 

For the rest of the day, yield on the 10-year benchmark 7.26%, 2032 bond is seen in the range of 7.27-7.34%. (Kasthuri Akhil)

India Gilts: Slightly down on caution ahead of 300-bln-rupee auction

 

 0930 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)99.6099.6599.5999.6499.64YTM (%)      7.31667.30937.31777.31087.3114

 

MUMBAI–0930 IST–Government bond prices were slightly lower today as traders were cautious ahead of the 300-bln-rupee auction, 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.

 

“Demand is seen firm for 7.10%, 2029 and 7.40%, 2062 bonds. However, the 7.41%, 2036 bond might see some pressure,” a dealer at a primary dealership said. “There was slight short betting on Thursday, so the auction will sail through.”

 

Traders also kept to the sidelines due to lack of significant domestic cues, dealers said. The yield on the benchmark

10-year 7.26%, 2032 bond is seen in a narrow range given the lack of firm domestic triggers and low volume, dealers said. 

 

The fall in US Treasury yields and crude oil prices was largely ignored by traders as that has been the case for the last few days, dealers said. Traders are not taking cues from the movement in US Treasury yields and crude oil prices because there are limited participants in the market as the year draws to a closedealers said.

 

After a dull trade this entire week, volume rose today as traders placed bets ahead of the auction. According to data on the RBI’s Negotiated Dealing System, Order Matching platform, the market-wide turnover was 68.70 bln rupees at 0930 IST, compared with 10.40 bln rupees at 0940 IST on Thursday.

 

Today, yield on the 10-year benchmark 7.26%, 2032 bond is seen in the range of 7.27-7.34%.  (Anjali)

India Gilts: Seen up as US yields, oil prices fall; auction eyed

 

MUMBAI – Government bond prices are seen opening higher tracking the fall in US Treasury yields and crude oil prices on Thursday, dealers said. However, gains may be limited as traders are likely to remain on the sidelines ahead of the weekly auction and a lack of significant cues, dealers said.

 

Today, yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.27-7.34%, as against 7.31% on Thursday.

 

US Treasury yields fell on Thursday as the data showed new claims for unemployment benefits in the US increased last week. Investors also weighed recession risks and assessed the outlook for Federal Reserve policy for the coming year. The yield on the benchmark 10-year US Treasury note fell 5 basis points to 3.83% on Thursday as compared to Wednesday’s close.

 

Oil prices fell for a second straight session on Thursday on an uncertain demand outlook, as more countries considered restrictions on Chinese travellers due to the COVID-19 surge in the world’s biggest oil-importing nation. Brent crude oil contract for March delivery was at $83.46 per barrel on Thursday as against $83.99 a bbl on Wednesday.

 

Domestically, traders may take cues from the result of the 300-bln-rupee debt sale, where demand is expected to be firm because of investor interest in the longer dated securities, 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.

 

Reserve Bank of India on Thursday released the calendar for auction of Treasury Bills for Jan-Mar. The government will raise 3.80 trln rupees through auction of T-bills in Jan-Mar.

 

Previous T-bill auctions have largely been easily subscribed, therefore traders are not expecting the calendar to make an impact on the gilts market, dealers said. (Nishat Anjum)

End

 

US$1 = 82.72 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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