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Friday, February 3, 2023

India Gilts Review: Rise sharply as rupee jumps, swap rates fall

Informist, Tuesday, Jan 10, 2023

 

By Shubham Rana and Anjali

 

MUMBAI/NEW DELHI – Prices of government bonds ended sharply higher today tracking a fall in overnight indexed swap rates and a surge in the rupee against the dollar, dealers said.

 

The 10-year benchmark 7.26%, 2032 bond ended at 99.63 rupees, or 7.32% yield, against 99.43 rupees, or 7.34% yield on Monday.

 

The five-year swap rate was down 4 basis points at 6.35% from Monday’s close, likely because offshore traders unwound paid fixed positions on the view that the US Federal Reserve might slow down rate hikes after the data releases last week pointed to a slowing US economy, dealers said.  

 

Meanwhile, the rupee surged against the dollar today as state-owned banks persistently sold the greenback for foreign portfolio inflows into upcoming primary debt issuances, dealers said. This led to stop-losses being triggered on long dollar bets at around 81.80 a dollar, dealers said. The rupee ended at the highest closing level since Dec 2.

 

“Rupee rose sharply today because of flows for SBI’s (State Bank of India) infrastructure bonds, which then led to a rise in gilts as well,” a dealer at a state-owned bank said.

 

According to media reports, State Bank of India may carry out a planned 100-bln-rupee sale of infrastructure bonds in the market this week, with the securities likely to have maturity of 15 years. 

 

Gilt prices rose in early trade tracking an overnight fall in US Treasury yields, dealers said. The benchmark 10-year US Treasury yield fell by 7 bps from the close of Indian market hours to 3.53% on Monday, and was largely steady today.

 

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.

 

Traders avoided placing large bets ahead of the release of domestic inflation data on Thursday, dealers said. Even as retail inflation eased to an 11-month low of 5.88% in November, sharply down from 6.77% in October, dealers expect the Reserve Bank of India to raise the repo rate by 25 bps in February as core inflation remained above the 6% threshold, before a prolonged pause.

 

The domestic headline inflation print for December is expected to bring clarity about the pace of rate hikes by the RBI, dealers said. According to an Informist poll, India’s retail inflation rate based on the CPI likely remained flat at 5.9% in December.

 

Traders were also cautious ahead of US December inflation data as the Monetary Policy Committee may need to extend rate hikes if the US Federal Reserve continues with firm monetary policy tightening, dealers said.

  

“The domestic inflation data release is a known event, traders don’t expect surprises,” a dealer at a primary dealership said. “US inflation data is more important.” 

 

According to data on the RBI’s Negotiated Dealing System – Order Matching platform, the turnover today was 322.25 bln rupees, compared with 278.00 bln rupees on Monday.

 

Meanwhile, trades aggregating 450 mln rupees were settled with the digital rupee pilot in seven deals, compared with 200 mln rupees in four deals on Monday.

 

OUTLOOK

On Wednesday, 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 CPI inflation data on Thursday. They may also take cues from overnight movement in US Treasury yields and crude oil prices. 

Yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.28-7.36%.

 

 

Today

Monday

Price

Yield

Price

Yield

7.26%, 2032

99.62507.3133%99.42507.3427%

7.38%, 2027

100.77007.1727%100.60757.2161%7.10%, 202999.13007.2721%98.90007.3186%7.54%, 2036101.27007.3873%101.10007.4074%7.41%, 2036100.30007.3744%100.04007.4045%

India Gilts: Up tracking fall in 5-year swap rate, surge in rupee

 

 

 

1445 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)99.5999.5399.4499.5199.43YTM (%)      7.31857.32767.34057.32997.3427

 

MUMBAI–1445 IST–Government bond prices rose because of a fall in overnight indexed swap rates and a rise in the rupee against the dollar, dealers said.

   

The five-year swap rate fell 5 basis points to 6.34% from Monday’s close as traders unwound paid fixed positions on the view that the US Federal Reserve might slow down rate hikes after the data releases last week pointed to a slowing US economy, dealers said. 

 

The rupee appreciated against the greenback as stop losses were triggered on long dollar bets around 82.10 a dollar level. The broad based weakness in the US unit prompted traders to sell the greenback to cut existing long dollar bets, dealers said. At 1450 IST, the rupee was at 81.85 a dollar, compared with 82.36 a dollar on Monday.

 

“The rupee has appreciated quite a lot today and OIS also down, so gilts are tracking both rupee and swaps,” a dealer at a private bank said. “There are offshore flows in the OIS, which has prompted some paying.” 

Traders also await the release of the domestic and US inflation data, both scheduled to be released on Thursday, dealers said.

 

According to data on the RBI’s Negotiated Dealing System, Order Matching platform, the market-wide turnover was 280.50 bln rupees at 1430 IST, compared with 75.65 bln rupees at 1230 IST on Monday.

 

Today, yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.28-7.35%.  (Anjali)

India Gilts: Tad up as US yields fall; Dec CPI eyed for fresh cues

 

 

 

0955 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.26%, 2032PRICE (rupees)99.4699.5399.4499.5199.43YTM (%)      7.33727.32767.34057.32997.3427

 

MUMBAI–0955 IST–Government bond prices rose slightly due to a fall in US Treasury yields on Monday, dealers said. Traders avoided placing large bets as they were cautious ahead of the release of domestic headline inflation print for December, due on Thursday. 

 

The benchmark 10-year US Treasury yields fell by 7 basis points from the close of Indian market hours to 3.53% on Monday. US Treasury yields fell on the view that the Federal Reserve might slow down rate hikes after the data releases last week pointed to a slowing US economy.

 

Back home, the CPI inflation data is expected to guide the Reserve Bank of India’s Monetary Policy Committee on the path of rate hikes. “Market is expected to remain in the current range until the release of domestic inflation data,” a dealer at a primary dealership said. “Inflation is expected between 5.85-6.00%, anything below 5.85% or above 6.00% will be a surprise.”

 

In November, CPI inflation fell to an 11-month low of 5.88%, sharply below the consensus estimate of 6.4%, and October’s level of 6.77%.

 

Traders also await the release of US December inflation data that is expected to bring further clarity about the pace of rate hikes by US Federal Reserve, dealers said. 

 

According to data on the RBI’s Negotiated Dealing System, Order Matching platform, the market-wide turnover was 43.65 bln rupees at 0930 IST, compared with 84.70 bln rupees at 0930 IST on Monday.

 

Today, yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.30-7.36%, as against 7.34% on Monday. (Anjali)

India Gilts: Seen tad up as 10-year US yld falls; CPI print in focus

 

NEW DELHI – Prices of government bonds are expected to open slightly higher today because of a fall in the benchmark 10-year US Treasury yield on Monday, dealers said.

 

Today, yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.30-7.36%, as against 7.34% on Monday.

 

The benchmark 10-year US Treasury yield settled at 3.53% on Monday, from 3.60% at the close of Indian markets. US yields fell on expectation that the Federal Reserve could soon stop hiking interest rates after data released last week pointed to a slowing US economy.

 

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.

 

Domestically, the market lacks significant triggers and traders may stay to the sidelines as they wait for the release of the inflation data, on Thursday, dealers said. The headline inflation print is expected to provide further guidance to the market about the path of rate hikes by the Reserve Bank of India’s Monetary Policy Committee.

 

In November, CPI inflation fell to an 11-month low of 5.88%, sharply below the consensus estimate of 6.4%, and October’s level of 6.77%.

 

Apart from the inflation print, traders await the presentation of the Union Budget for 2023-24 (Apr-Mar), for fresh cues, dealers said. (Shubham Rana)

 

End

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

 

Edited by Aditya Sakorkar

 

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.

 

Informist Media Tel +91 (22) 6985-4000 

Send comments to [email protected]

 

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

Source: Cogencis

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