India Gilts Review:Ylds rise on worries over extra supply in Apr-Sep

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India Gilts Review:Ylds rise on worries over extra supply in Apr-Sep

Monday, Mar 30

 

By Suyash Pande

 

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MUMBAI – Government bond yields climbed sharply today because market participants fretted over the prospect of larger-than-expected borrowing in the Centre’s Apr-Sep borrowing plan, which is expected to be released soon, dealers said.

 

The 10-year benchmark 6.45%, 2029 bond closed at 101.71 rupees or 6.21% yield, against 102.18 rupees or 6.14% yield on Friday.

 

The coronavirus pandemic and restrictions put in place by the Centre to contain its spread are expected to sharply bring down India’s economic growth. Global ratings agency Moody’s expects India’s GDP growth in 2020 to be at 2.5%, and India Ratings expects GDP growth for 2020-21 (Apr-Mar) at 3.6%.

 

The Centre considered nominal growth of 10% while proposing its Budget but it faces significant headwinds in the form of the coronavirus pandemic. The government has imposed a 21-day lockdown and many people expect the Centre to extend the lockdown if spread of the virus does not slow down.

 

On Friday, Reserve Bank of India Governor Shaktikanta Das refrained from presenting a GDP projection because of the risks posed by the virus.

 

Lower economic growth would reduce revenues and tax collections of the government and also push the Centre towards announcing more fiscal measures to support the economy.

 

The Centre has already announced a 1.7-trln-rupee stimulus package for direct cash transfer to vulnerable sections of society. It is expected to announce more measures to support industries such as hospitality and airlines, which that have come to a standstill because of the virus.

 

Considering that the gross market borrowing for 2020-21 (Apr-Mar) is already a record high of 7.8 trln rupees, additional borrowing from the market may be difficult to absorb, dealers said.

 

On Friday, when the RBI announced a slew of measures to protect the economy from the impact of coronavirus, market participants were disappointed that the central bank did not announce plans to purchase government bonds through open market operations.  

 

Today, market participants booked profits to shore up their books before the end of the financial year on Tuesday.

 

Weak global risk appetite, which weighed on the rupee, also prompted foreign portfolio investors to sell government bonds. The Indian currency fell 1% to 75.61 per in onshore market hours. Depreciation in the local currency eats into the of FPIs from fixed income assets.

 

Net investment by FPIs into gilts fell by 9.21 bln rupees today. FPIs have net sold gilts worth 454.72 bln rupees in March, according to data available on Clearing Corp of India.

 

The sharp sell-off at the fag end of trade triggered stop-losses of some banks after the yield on the 10-year topped the psychologically crucial 6.20% mark.

 

Price movement was exacerbated because of low trade volumes. Many traders are working from home and refrained from placing large bets because of the disruption in schedule. Market-wide turnover was at 155.70 bln rupees today, against 352.4 bln rupees on Friday, data available on the RBI’s Negotiated Dealing System – Order Matching platform showed.

 

Government bonds are likely to fall on Tuesday because market participants may book profits before the end of the financial year to shore up their books.

 

Market participants may also choose to stay on the sidelines because of caution ahead of the release of the borrowing calendar for Apr-Jun. The government’s borrowing programme is expected to resume this week or the next. Fear of additional borrowing in 2020-21 (Apr-Mar) may lend a downward to bonds on Tuesday.

 

Any sharp overnight movement in crude and US Treasury yields may also provide cues at open.

 

The yield on the 10-year benchmark 6.45%, 2029 bond is seen in a band of 6.18-6.23%.

 

  TODAY THURSDAY
Price Yield Price Yield

7.32%, 2024

 105.6000  5.6686%  105.9200  5.5777%

7.27%, 2026

 104.6300  6.3328%  105.0350  6.2533%
7.26%, 2029  103.9500  6.6569%  104.5500  6.5682%
6.45%, 2029  101.7100  6.2091%  102.1825  6.1435%
7.57%, 2033  107.0000

 6.7588%

 107.9500

 6.6545%


India Gilts: Fall more on worry over additional borrowing in Apr-Sep

 

  1625 IST   PRICE HIGH   PRICE LOW        OPEN     PREVIOUS
6.45%, 2029
PRICE (rupees) 101.82 102.35 101.80 102.35 102.18
YTM (%)       6.1938 6.1204 6.1966 6.1204 6.1435

 

India Gilts: Fall more on worry over additional borrowing in Apr-Sep

 

NEW DELHI–1625 IST–Government bond prices fell more as market participants were worried that the government may announce additional borrowing in the Apr-Sep borrowing calendar, which is to be released soon, dealers said.

 

Market participants have been wary of fiscal slippage that may lead to additional borrowing ever since the government announced a 1.7-trln-rupee relief package in an attempt to provide relief to the marginalised sections of the society, which may suffer economically due to the spread of coronavirus.

 

“The goverment has made an announcement and there is talk about more announcements surely there is going to be extra borrowing. The market doesn’t have confidence before the borrowing program,” a dealer with a state-owned bank said.

 

The country has been put under a complete lockdown since last week, as the government plans to flatten the curve of the number of cases, which has led to disruption in economic activity across the country. Market-wide turnover has also been impacted due to the lockdown as treasury officials are still unable to manage their day-to-day functioning. The fall in prices was exacerbated because of low volumes.

 

Moreover, heavy selling by foreign portfolio investors also weighed on bonds. Overseas investors have net sold 5.6 bln rupees worth of Indian dated securities so far in the day, data available on the website of Clearing Corp of India showed. A sharp depreciation in the rupee against the dollar also weakened the appetite of foreign portfolio investors. 

 

The slipped against the dollar today as shutdowns in various countries to contain spread of coronavirus deepened fears of a global , dealers said.  (Vaibhav Chakraborty)


India Gilts: Dn on profit booking before yr-end; H1 borrow plan eyed

 

  1150 IST   PRICE HIGH   PRICE LOW        OPEN     PREVIOUS
6.45%, 2029
PRICE (rupees) 102.06 102.35 102.00 102.35 102.18
YTM (%)       6.1605 6.1204 6.1685 6.1204 6.1435

 

MUMBAI-–1150 IST–Government bonds fell because market participants chose to book profits before the close of financial year 2019-20 (Apr-Mar) on Tuesday, dealers said. Market participants also chose to reduce holdings ahead of the release of Apr-Sep borrowing calendar. 

 

Traders were risk-averse as some feared that a large part of market borrowing may be front-loaded in the Apr-Sep calendar, which may allow the Centre to do extra market borrowing than earlier budgeted, dealers said. 

 

The coronavirus pandemic and restrictions imposed to contain its spread have raised concerns over the finances of the Centre and state governments. The restrictions imposed are expected to bring down India’s GDP growth significantly and may push several advanced economies globally into recession. On Friday, Reserve Bank of India Governor Shaktikanta Das refrained from presenting a GDP projection because of the risks posed by the virus. 

 

Lower economic growth would reduce revenues and tax collections of the government and also push the Centre towards announcing more fiscal measures to support the economy. The Centre has already announced a 1.7-trln-rupee stimulus package and is expected to announce more measures. 

 

When Das announced reduction in repo rate on Friday among other monetary measures, market participants were left disappointed by the central bank’s decision to refrain from announcing a large-scale purchase of government bonds through open market operations, especially as the Centre is expected to announce extra borrowing for 2020-21 (Apr-Mar). 

 

“Right now volumes are very less and people will not do any buying before the financial year-end. People are right now booking profits, and they want to get some clarity on the borrowing calendar before any buying starts,” a dealer with a state-owned bank said. 

 

Yield on the 10-year benchmark 6.45%, 2029 bond is seen in a band of 6.12-6.17% for rest of the day. (Suyash Pande)


India Gilts: Steady ahead of Apr-Sep borrow calendar

 

  0950 IST   PRICE HIGH   PRICE LOW        OPEN     PREVIOUS
6.45%, 2029
PRICE (rupees) 102.15 102.35 102.15 102.35 102.18
YTM (%)       6.1477 6.1204 6.1477 6.1204 6.1435

 

NEW DELHI– 0950 IST-–Government bond prices were steady amid dismal trade volumes ahead of release of Apr-Sep borrowing calendar, dealers said.

 

The market did not see any deal in the first 10 minutes of opening on the Reserve Bank of India’s Negotiated Dealing System-Order Matching System due to a wide gap between the bid and ask, dealers said.

 

The 10-year benchmark 6.45%, 2029 bond was quoted at 102.18-102.35 rupees.

 

With the borrowing calendar for first half due this week, market participants opted to tread with caution as they fear that the supply of bonds may rise after the Centre on Thursday announced a 1.7-trln-rupee relief package to cushion the economic blow from the disruption caused due to the spread of coronavirus, dealers said. The gross borrowing for 2020-21 (Apr-Mar) is currently pegged at 7.8 trln rupees.

 

“There is no interest left in the market largely because the market is now awaiting the borrowing calendar as well as traders would most probably refrain (from placing bets) ahead of year-end as well,” a dealer with a large private bank said.

 

“We are still faced with operational challenges in the lockdown as participants are struggling to adjust to work from home due to challenges,” the dealer added.

 

Trade volumes remained muted as market participants continued to face operational challenges amid lockdown imposed across the country last week in an attempt to limit the number of coronavirus cases from rising.

 

Traders also took the opportunity to book profit after the sharp rise in prices on Friday. Yield on the 10-year benchmark touched an 11-year low of 5.98% before climbing up to settle at 6.14% on Friday after the RBI’s monetary measures were announced.  

 

On Friday, the RBI’s Monetary Policy Committee cut repo rate by 75 basis points as calls for the central bank to step in grew louder after the government announced a 1.7-trln-rupee relief package on Thursday. 

 

A sharp depreciation in rupee against the dollar also weighed on the bonds as market participants feared heavy selling by the foreign portfolio investors, dealers said. 

 

Rupee weakened against the greenback as lockdowns in various countries to contain spread of coronavirus deepened fears of a global recession, dealers said.

 

Today, yield on the 10-year benchmark 6.45%, 2029 bond is seen in a band of 6.05-6.20%, during the day, dealers said.  (Vaibhav Chakraborty)


India Gilts:Seen up; mood may remain buoyant after RBI rate cut

 

NEW DELHI – Government bond prices are likely to open higher as mood in the market may be buoyant after the Reserve Bank of India on Friday surprised by announcing a much-anticipated rate cut and measures to infuse further liquidity in the system in an attempt to soften the economic blow from the spread of coronavirus.

 

On Friday, the RBI’s Monetary Policy Committee cut repo rate by 75 basis points as calls for the central bank to step in grew louder after the government announced a 1.7-trln-rupee relief package on Thursday. 

 

Apart from the rate cut, the Reserve Bank of India announced up to 1-trln-rupee of targeted long-term repo operations along with a 90 basis points reduction in the reverse repo in order to discourage banks from parking their funds with the central bank. 

 

The central bank also lowered the cash reserve ratio by 100 basis points to 3.00% of net demand and time liabilities for a period of one year, a move that would release 1.37 trln rupees worth of excess liquidity in the system.

 

Short-term papers are likely to be lifted more because of the RBI’s announcement of up to 1 trln rupees worth of targeted long-term repo operations, of which 250-bln-rupee auction took place on Friday and received a good response from the market with a bid cover ratio of 2.4:1.

 

A sharp fall in the US Treasury yields and crude oil prices on Friday may also support the rise in prices. Yield on the 10-year benchmark US Treasury note fell by 11 basis points on Friday, while May crude oil futures settled $1.09 per barrel lower on the New York Mercantile Exchange. 

 

Some traders may take the opportunity to book profits after the sharp rise in prices on Friday and ahead of the end of the current financial year. Yield on the 10-year benchmark touched an 11-year low of 5.98% before climbing up to settle at 6.14% on Friday after the RBI’s monetary measures were announced. 

 

Some traders would look to lighten their portfolio ahead of the release of borrowing calendar for Apr-Sep, as they fear an increase in supply after the government’s 1.7 trln rupees fiscal stimulus.

  

Moreover, disappointment of no announcement on open market purchase of dated securities calendar may weigh on bonds. Market participants were expecting that the hardening of bond yields in the last few weeks may prompt the RBI to come out with an outright calendar for the purchase of bonds through open market operations.

 

Today, yield on the 10-year benchmark 6.45%, 2029 bond is seen in a band of 6.05-6.20% as against 6.14% at previous close.  (Vaibhav Chakraborty)

 

End

 

US$1 = 75.61 rupees 

 

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

 

Edited by Avishek Dutta

 

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