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India Gilts Review: Up sharply as US yields slump post jobs data

Informist, Monday, Jan 9, 2023

 

By Anjali and Kasthuri Akhil

 

MUMBAI – Prices of government bonds ended sharply higher today, tracking a slump in US Treasury yields on Friday after data on the US labour market showed a slower pace of wage increases, dealers said. However, gilts erased some gains due to a rise in US Treasury yields during the day and as some traders sold their bond holdings at a profit, noting the early rise in prices.

 

The 10-year benchmark 7.26%, 2032 bond ended at 99.43 rupees, or 7.34% yield, against 99.22 rupees, or 7.37% yield on Friday.

 

“Whatever was bought at the auction on Friday was sold as prices were high since morning,” a dealer at a state-owned bank said. “But there hasn’t been any major selling, therefore prices have remained stable.”

 

The yield on the benchmark 10-year US Treasury note rose to 3.60% after settling at 3.55% on Friday, 16 basis points lower than Thursday’s settlement. A fall in US Treasury yields widens the interest rate differential between the safe-haven asset and emerging market debt, making the latter more appealing to foreign investors.

 

US Treasury yields fell sharply on Friday due to increased expectations of the US Federal Reserve moderating its pace of rate hikes after non-farm payrolls data for the US showed a cooling labour market.

 

Job growth in the US slowed to a two-year low of 223,000, but was still above market estimates, data released by the Labor Department on Friday showed. According to data from the CME Group’s Fedwatch tool, close to 75% of Fed funds traders expect a 25-basis-point rate hike at the two-day meeting starting on Jan 31, against 68% before the release of the jobs data. 

 

The outliers see a 50-bps rate hike, the same quantum that the US Fed had effected in December.

 

Traders now await key domestic headline inflation data for December, due on Thursday, which is expected to give further guidance to the market about the path of rate hikes that the Reserve Bank of India’s Monetary Policy Committee will take, dealers said. 

 

“The CPI data release is an event market is looking forward to,” a dealer at a private bank said. “There aren’t any domestic cues to look at, so everyone ended up tracking US Treasury yields.”

 

CPI inflation in India fell to an 11-month low of 5.88% in November, the first time in 2022 that consumer inflation returned to the RBI’s 2-6% target band. Some traders expect a repeat print under the key 6% mark, which could push up gilt prices more, dealers said.

 

On the other hand, some dealers were of the view that traders would avoid aggressive bets until the presentation of the Union Budget for 2023-24 (Apr-Mar), likely on Feb 1.

 

According to data on the RBI’s Negotiated Dealing System – Order Matching platform, the turnover today was 278.00 bln rupees, compared with 323.75 bln rupees on Friday.

 

Meanwhile, trades aggregating 200 mln rupees were settled with the digital rupee pilot in four deals, compared with 350 mln rupees in seven deals on Friday.

 

OUTLOOK

On Tuesday, bond prices are seen opening steady due to lack of significant domestic cues, dealers said. Traders may also remain on the sidelines ahead of the release of key headline inflation data on Thursday.

 

Traders may also take cues from overnight movement in US Treasury yields and crude oil prices. 

The yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.30-7.38%.

 

 

Today

 Friday

Price

Yield

Price

Yield

7.26%, 2032

99.42507.3427%99.21507.3736%

7.38%, 2027

100.60757.2161%100.38007.2768%7.10%, 202998.90007.3186%98.73757.3516%7.54%, 2036101.10007.4074%100.73257.4510%7.41%, 2036100.04007.4045%99.82007.4302%

 

India Gilts: Remain sharply up as US ylds slump, Dec India CPI eyed

 

 1230 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)99.4899.5699.4599.5099.22YTM (%)      7.33467.32287.33907.33167.3736

 

MUMBAI—-1230 IST—-Government bond prices remained sharply higher tracking a slump in US Treasury yields on Friday, dealers said. US Treasury yields fell sharply on increased expectations of the US Federal Reserve moderating its pace of rate hikes as the US non-farm payroll data showed easing job growth in the US.

 

The yield on the benchmark 10-year US Treasury note fell 16 bps to 3.55% on Friday from Thursday’s close. Job growth in the US slowed to a two-year low of 223,000 in December, but was above the market estimates, data released by the Labor Department on Friday showed.

 

Back home, traders keenly await the release of key headline inflation data, due on Thursday, which is expected to give some guidance to the market about the path of rate hikes that the Reserve Bank of India’s Monetary Policy Committee will take, dealers said.

 

“Before the Budget, traders would largely be on sidelines as even the CPI data is expected to be benign and in line with market expectations,” a dealer at a private bank said. The presentation of the Union Budget for 2023-24 (Apr-Mar) is likely on Feb 1.

 

According to data on the RBI’s Negotiated Dealing System, Order Matching platform, the market-wide turnover was 171.30 bln rupees at 1230 IST, compared with 75.65 bln rupees at 1230 IST on Friday.

 

For the rest of the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen in the range of 7.30-7.36%. (Kasthuri Akhil)

India Gilts: Surge tracking slump in US Treasury ylds post jobs data

 

 1020 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)99.5199.5699.4599.5099.22YTM (%)      7.33027.32287.33907.33167.3736

 

MUMBAI–1020 IST–Prices of government bonds were sharply higher tracking a slump in US Treasury yields on Friday as the latest US jobs data increased expectations that the US Federal Reserve may slow down the pace of its interest rate hikes, dealers said.

 

Job growth slowed to a two-year low of 223,000 for the month, but was still above the market estimates, data released by the Labor Department on Friday showed. According to data from the CME Group’s Fedwatch tool, close to 75% of Fed funds traders expect a 25-basis-point rate hike in the two-day meeting starting on Jan 31, against 68% before the release of jobs data.

 

The yield on the benchmark 10-year US Treasury fell by 16 bps to 3.55% on Friday from Thursday’s close. A fall in the US Treasury yields widens the interest rate differential between the safe-haven asset and emerging market debt, making the latter more appealing to foreign investors.

 

Some dealers are of the view that if the Fed slows down the pace of rate hikes and the domestic inflation print remains below crucial 6% levels, it may prompt the Reserve Bank of India’s rate setting panel to go for a 25-bps hike in February meeting.

 

“After the rise due to the fall in US Treasury yields, there is no other domestic trigger,” a dealer at a private bank said. “However, market is now looking forward to the CPI print.”

 

Domestically, traders turn their attention to the CPI inflation data, due later this week, for fresh cues.

 

According to data on the RBI’s Negotiated Dealing System, Order Matching platform, the market-wide turnover was 84.70 bln rupees at 0930 IST, compared with 9.15 bln rupees at 0930 IST on Friday.

 

Today, the yield on the 10-year benchmark 7.26%, 2032 bond is seen in the range of 7.31-7.37%. (Nishat Anjum)

India Gilts: Seen up tracking fall in US Treasury yields on Fri

 

MUMBAI – Government bond prices are seen opening higher today tracking a slump in US Treasury yields on Friday after the US labour market data showed a slower pace of wage increases, dealers said.

 

Today, yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.32-7.39%, as against 7.37% on Friday.

 

US Treasury yields fell sharply after non-farm payrolls data for December showed the tight labour market was cooling, which may in turn give space to the US Federal Reserve to ease the interest rate hikes.

 

The yield on the benchmark 10-year US Treasury slumped by 16 basis points to 3.55% on Friday from Thursday’s close. A fall in the US Treasury yields widens the interest rate differential between the safe-haven asset and emerging market debt, making the latter more appealing to foreign investors.

 

In the world’s largest economy, average hourly earnings rose 4.6% on year in December, according to the Labor Department data released Friday. For the month, job growth slowed to a two-year low of 223,000, but was still above market estimates.

 

Traders may avoid aggressive bets, eyeing further triggers on the domestic front as the government’s first estimate for GDP growth in 2022-23 (Apr-Mar) was in line with market expectations, dealers said. 

 

After market hours on Friday, the National Statistical Office pegged India’s GDP growth in the current fiscal at 7.0%, against 8.7% a year ago. Analysts had projected a 6.9% growth estimate, according to the median of an Informist poll. (Nishat Anjum)

 

End

 

US$1 = 82.36 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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Send comments to [email protected]

 

© Informist Media Pvt. Ltd. 2023. All rights reserved.

Source: Cogencis

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