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India Gilts Review: Little changed on caution ahead of India, US CPI

Informist, Thursday, Oct 12, 2023

 

By Nishat Anjum

 

MUMBAI – Prices of government bonds ended little changed as traders avoided aggressive bets ahead of CPI inflation data for the US and India for September, dealers said. The market remained lacklustre throughout the day.

 

The 10-year benchmark 7.18%, 2033 bond closed at 99.17 rupees, or 7.30% yield, against 99.12 rupees, or 7.30% yield, on Wednesday.

 

India’s CPI inflation data for September is scheduled at 1730 IST, with an Informist poll of 21 economists showing consumer inflation likely to fall to a three-month low of 5.4% from 6.83% in August. If domestic inflation is below the market’s estimates, the yield on the benchmark 7.18%, 2033 bond may fall to 7.25%.

 

“Nothing significant happened in the market today. Just a bit of short covering done on caution ahead of the data,” a dealer at a private bank said. “Our data is due, but I think people are more eagerly waiting for US data and US yields’ movement.”

 

A section of the market expects the domestic September inflation print to be below the market consensus of 5.4%, dealers said. If that is the case, the yield on the benchmark 10-year, 7.18%, 2033 bond may slip by 2-3 basis points.

 

Even as the inflation print is expected to fall in the Reserve Bank of India’s tolerance band of 2-6%, it remains way above the medium-term inflation target of 4%. Reserve Bank of India Governor Shaktikanta Das had on Friday emphasised that the central bank’s aim was to bring inflation down to 4%.

 

However, the yield on the 2033 bond may remain above the crucial 7.25% mark, unless the market gets clarity from the RBI regarding open market operation sales, dealers said. On Friday, the RBI governor had said the central bank might opt for OMO sales to manage liquidity.

 

During the day, bonds largely moved in a thin band ahead of the crucial data on inflation, which may lend cues for the rate trajectory in both the US and India, dealers said.

 

Economists polled by Dow Jones have forecast a 0.3% month-on-month increase in CPI inflation in the US, and a 3.6% rise from a year ago. US CPI data is scheduled to be released at 1800 IST.

 

The market is awaiting US inflation data more eagerly than the domestic CPI print, as it comes ahead of the US Federal Open Market Committee’s meeting scheduled for November, dealers said.

 

“Anyway, the hike in the US is expected at the December meeting. In November, they will just be hawkish, saying that rates are going to be higher for longer,” a dealer at a state-owned bank said. “But if this data is again on the higher side, we may again see US yields above 4.62-4.63% (on the 10-year US Treasury note).” 

 

The CME Group’s FedWatch tool showed the chance of a rate hike at the Fed’s Oct 31-Nov 1 meeting falling to 8.2% from around 13% earlier. The current federal funds rate is 5.25-5.50%.

 

According to data on the RBI’s Negotiated Dealing System-Order Matching platform, the turnover today was 340.40 bln rupees, compared with 411.85 bln rupees on Wednesday. There were six trades in the rupee pilot today worth 500 mln rupees, against eight trades worth 600 mln rupees on the previous day.

 

OUTLOOK

On Friday, prices of government bonds may open steady as traders may avoid aggressive bets due to caution ahead of the 340-bln-rupee gilt auction, dealers said.

 

Traders may also take cues from the US and India September inflation data, dealers said.

 

A sharp move in US Treasury yields and crude oil prices could also be a trigger for gilt prices at open.

 

The yield on the 10-year benchmark 7.18%, 2033 bond is seen in a range of 7.27-7.33%.

 

 

Today

 Wednesday

Price

Yield

Price

Yields

7.18%, 2033

99.17007.2977%99.12007.3049%

7.26%, 2033

99.39007.3493%99.35007.3553%7.17%, 203098.95007.3757%98.95007.3756%7.18%, 203797.93007.4205%97.90007.4241%7.06%, 202899.02007.3197%98.91007.3490%

India Gilts: Remain in thin band; market awaits US, India CPI data

 

 1515 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.18%, 2033PRICE (rupees)99.1599.2399.0699.1099.12YTM (%)      7.30067.28977.31367.30787.3049

 

MUMBAI–-1515 IST–Prices of government bonds moved in a thin band as traders await US and India’s CPI inflation data, due after market hours, dealers said. An intraday rise in US Treasury yields weighed on gilts.

 

The yield on the benchmark 10-year US Treasury note rose to 4.57% from a low of 4.54% in early trade. 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.

 

“Traders are avoiding placing aggressive bets as the inflation data of US and India are lined up for the day,” a dealer at a state-owned bank said. “Furthermore, the gilts auction is tomorrow (Friday), so the market usually does not place large bets. They would rather place short bets.”

 

Among on-the-run gilts, the price of the 7.18%, 2037 bond was down as traders placed short bets ahead of the 340-bln-rupee bond auction on Friday, dealers said. Typically, traders cover their short bets at the primary auction.

 

On Friday, the government will auction 120 bln rupees worth of 7.17%, 2030 bond, 100 bln rupees of the 7.18%,2037 bond, and 120 bln rupees worth of 7.25%, 2063 bond.

 

During the day, bonds moved largely in a thin band ahead of crucial data on inflation, which may lend cues for the rate trajectory, both in the US and in India, dealers said.

 

For September inflation data for the US, economists polled by Dow Jones have forecast a 0.3% on-month increase, and a 3.6% rise from a year ago. Meanwhile, according to an Informist poll of 21 economists, consumer inflation in India is likely to fall to a three-month low of 5.4% from 6.83% in August.

 

US CPI data is scheduled to be released at 1800 IST, while India’s CPI inflation will be released at 1730 IST.

 

According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the market-wide turnover at 1515 IST was 279.10 bln rupees, compared with 324.70 bln rupees at 1530 IST on Wednesday. 

 

During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.28-7.34%. (M.C. Adhiinthran)

India Gilts: Tad up in thin trade; mkt eyes US, India Sep CPI data

 

 1245 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.18%, 2033PRICE (rupees)99.1599.2399.1099.1099.12YTM (%)      7.30027.28977.30787.30787.3049

MUMBAI–1245 IST–Prices of government bonds were a tad up, tracking a fall in overnight indexed swap rates, dealers said. Traders avoided aggressive bets on caution ahead of the US and India CPI inflation data, due after market hours.

 

The five-year swap rate fell to 6.69%, from 6.73% in early trade. Some offshore traders likely received fixed rates ahead of the US CPI data, dealers said.

 

In addition, traders covered their bets, which they had placed on Tuesday expecting the Reserve Bank of India to release the open market operation sales notification, dealers said. 

 

Amongst on-the-run gilts, prices of 7.06%, 2028 bond swung sharply, likely on account of erroneous trades by some market participants, dealers said.

 

“Actually, our yields will get more affected by US inflation data, than compared with ours,” a dealer at a state-owned bank said.  “Our markets will closely track US Treasury yields. If US yields rally, we will also rally as uncertainty regarding OMO (open market operations) is hanging like a sword over our heads.” 

 

US CPI print for September, due later today, may give further cues about the US Federal Reserve’s rate hike trajectory going forward. Economists polled by Dow Jones are forecasting a 0.3% month-on-month increase for the upcoming US inflation data, and a 3.6% rise from the prior year. US CPI data is scheduled to be released at 1800 IST.

 

The market more eagerly awaits the US inflation data, as compared to the domestic CPI, as it is comes ahead of the US Federal Open Market Committee meeting lined up in November, dealers said.

 

Meanwhile, India’s CPI inflation print for September is scheduled at 1730 IST, with an Informist poll of 21 economists showing consumer inflation is likely to fall to a 3-month low of 5.4% against 6.83% in August. If domestic inflation is below the market’s estimates, then the yield on the benchmark 7.18%, 2033 bond may fall to 7.25%.

 

However, the yield on the 2033 bond may remain above the crucial 7.25% mark, unless the market gets clarity from the Reserve Bank of India regarding the OMO sales, dealers said.

 

According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the market-wide turnover was 173.35 bln rupees, compared with 146.40 bln rupees at 1230 IST on Wednesday. 

 

During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.28-7.34%. (Siddhi Chauhan)

India Gilts: Little changed on caution ahead of India Sep CPI data

 

 0936 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS7.18%, 2033PRICE (rupees)99.1499.2199.1099.1099.12YTM (%)      7.30207.29197.30787.30787.3049

 

MUMBAI–0936 IST–Prices of government bonds were little changed as traders avoided aggressive bets on caution ahead of the India CPI inflation data, scheduled to be released at 1730 IST, dealers said. A fall in crude oil prices kept the gilts afloat.

 

“Crude is always a secondary factor, aiding whatever sentiment is prevailing in the market,” a dealer at a private bank said. “Today’s data is expected to be favourable to bonds, so we started acknowledging a fall in crude.”

 

India’s CPI inflation print for September is scheduled at 1730 IST, with an Informist poll of 21 economists showing consumer inflation is likely to fall to a 3-month low of 5.4% against 6.83% in August.

 

A section of the market expects the domestic September inflation print to be below the market consensus of 5.4%, dealers said. If the inflation data is below the estimate, then the yield on the benchmark 10-year, 7.18%, 2033 bond may slip 2-3 basis points.

 

Even as the inflation print is expected to fall in the Reserve Bank of India’s tolerance band of 2-6%, it remains way above the medium term inflation target of 4%. RBI Governor Shaktikanta Das on Friday had emphasised that the central bank’s aim is to bring inflation down to 4%.

 

Meanwhile, Brent crude for December delivery was $85.52 per barrel, down from $87.65 a bbl the previous day. A fall in crude prices reduces fears of imported inflation in India, the world’s second-largest importer, and reduces pressure on the Reserve Bank of India to keep monetary policy tight.

 

Oil prices fell due to a larger-than-expected rise in crude and gasoline stocks in the US and on easing supply concerns.

 

According to data on the Reserve Bank of India’s Negotiated Dealing System–Order Matching platform–the market-wide turnover was 32.60 bln rupees, compared with 40.55 bln rupees at 0930 IST on Wednesday. 

 

During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.28-7.33%.  (Nishat Anjum)

India Gilts: Seen tad up on fall in oil prices; India, US CPI eyed

 

MUMBAI – Government bond prices may rise slightly due to a fall in crude oil prices after Saudi Arabia, the world’s largest producer, said it would stabilise prices despite the breakout of geopolitical conflict in West Asia. Traders may avoid large bets ahead of CPI inflation prints scheduled in India and the US after market hours, dealers said.

 

The yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.27-7.33% today as against 7.30% on Wednesday.

 

Brent crude for December delivery settled at $85.82 a bbl on Wednesday, down from $87.65 a bbl the previous day. In Asian trade today, the contract eased further to $85.40 a bbl. A fall in crude prices reduces fears of imported inflation in India, the world’s second-largest importer, and reduces pressure on the Reserve Bank of India to keep monetary policy tight.

 

US Treasury yields were largely unaffected by the minutes of the Federal Open Market Committee’s September meeting, released late Wednesday, and would not lend cues to gilt prices at open, dealers said. The 10-year US Treasury note was at 4.57% in Asian trade.

 

The heavy calendar of data after market hours could keep gilt prices capped, dealers said. India’s CPI inflation print for September is scheduled at 1730 IST, with an Informist poll of 21 economists showing consumer inflation likely falling to a 3-month low of 5.4% against 6.83% in August.

 

Meanwhile, India’s industrial production is expected to have risen to a 14-month high of 9.0% in August from 5.7% in July, primarily on account of a statistical effect of a low base, an Informist poll of 17 economists showed. The data will be released along with CPI data.

 

As for the US, economists polled by Dow Jones forecast a 0.3% month-on-month increase for the upcoming US CPI inflation data for September, and a 3.6% rise from the prior year.

 

Traders may book profit as the 10-year benchmark yield falls under 7.30%, under which bond buys are not seen as lucrative for investors. The bonds at the 340-bln-rupee weekly gilt auction today may lag other papers as primary dealers place short bets, dealers said.

 

The government will sell 120 bln rupees of the 7.17%, 2030 bond, 100 bln rupees of the 7.18%, 2037 bond and 120 bln rupees of the 7.25%, 2063 bond on Friday.  (Aaryan Khanna)

 

End

 

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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Source: Cogencis

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