Informist, Monday, Feb 28, 2022
By Shubham Rana
NEW DELHI – Government bonds ended lower as traders trimmed holdings noting a sharp rise in Brent crude oil prices today due to concerns over supply from Russia, and the Centre’s announcement of additional Treasury bills issuance in March, dealers said.
The 10-year benchmark 6.54%, 2032 bond settled at 98.35 rupees or 6.77% yield, against 98.50 rupees or 6.75% yield on Friday.
Brent crude oil futures were up nearly 5% intraday and topped the psychologically crucial $105-per-bbl mark after Russian President Vladimir Putin put his country’s nuclear forces on ‘special alert’ amid the ongoing invasion of Ukraine.
Moreover, the Centre’s announcement of an additional 600-bln-rupee short-term borrowing through Treasury bills in March weighed on short-term gilts. The government will now borrow 1.86 trln rupees through issuance of Treasury bills in March, higher than the earlier scheduled amount of 1.26 trln rupees.
In a press release on Friday, the government said it had modified the amount for issuance of Treasury bills during Mar 2-31 after reviewing its cash position and in consultation with the Reserve Bank of India.
The Centre will raise 70 bln rupees through the 91-day T-bill, 150 bln rupees through the 182-day T-bill and 150 bln rupees through the 364-day T-bill, according to the revised calendar, starting Mar 9. This week, the government will raise 160 bln rupees through the 364-day paper, with the other amounts remaining the same.
Traders will take further cues on the rise in short-term gilt yields from the cut-offs at the T-bill auction on Wednesday, dealers said.
“Towards the end of the trade the yield rose slightly, there isn’t any specific reason, but you can say it was because of the high SDL (state development loan) cut-off today,” a dealer at a state-owned bank said.
Today, the Reserve Bank of India set the cut-off yield on states’ 10-year bonds in the range of 7.12-7.17%, slightly higher than what dealers had expected in an Informist poll of 14 respondents. According to poll, the cut-off was seen at 7.12-14%.
However, losses were limited with traders staying on the sidelines, mainly because of uncertainty over the ongoing geopolitical situation in Ukraine.
Traders also avoided large bets in a curtailed trading week with a lack of fresh gilt supply, dealers said. With the Centre increasing the borrowing through T-bills, the market now expects that there won’t be additional borrowing in 2021-22 (Apr-Mar).
“Centre has increased its borrowing through T-bills but one big doubt in the market is of LIC IPO (Life Insurance Corp of India’s initial public offering) being suspended because of the fall in the (equity) market. If money doesn’t come from the LIC IPO then government will have to borrow money from the market,” the dealer said.
Money markets in India will remain shut on Tuesday on account of Maha Shivratri.
According to data on the Reserve Bank of India’s Negotiated Dealing System – Order Matching platform, the market-wide turnover was 135.30 bln rupees, against 239.25 bln rupees on Friday.
OUTLOOK
Gilts won’t be traded on Tuesday as domestic money markets will be shut on account of Maha Shivratri.
Government bonds are seen opening steady on Wednesday due to a lack of significant cues.
An unexpected announcement of a gilt auction, after market hours Monday, may lead to traders trimming their holdings, dealers said.
Traders will also look at new developments in the ongoing invasion of Ukraine by Russia for triggers, particularly for longer-dated government bonds.
Any sharp movement in US Treasury yields and crude oil prices might also lend cues in opening trade.
The yield on the 10-year benchmark 6.54%, 2032 bond is seen at 6.72-6.82%.
India Gilts: In thin band; volumes low due to short wk, lack of cues
NEW DELHI–1522 IST–Government bonds were confined to a narrow range amid dismal trade volumes as traders stayed on the sidelines due to a truncated week and a lack of significant cues, dealers said.
Money markets will be shut on Tuesday for Maha Shivratri.
Bond prices fell earlier in the day because traders trimmed their holdings as Brent crude prices reached the $105-per-barrel mark, amid renewed concerns over oil supply from Russia, dealers said.
Brent crude futures contract for April delivery rose up to 5% today after Russian President Vladimir Putin put his country’s nuclear forces on high alert amid the ongoing invasion of Ukraine.
“Market is dull, there is nothing coming up (any major event), (rise in) crude is also factored in till $105-per barrel, if it goes higher than that, then we may see some action,” a dealer at a state-owned bank said.
Bonds, particularly of shorter maturity, were further weighed down by the Centre’s announcement of an additional 600 bln rupees of short-term borrowing through Treasury bills in March.
Traders kept to the sidelines also due to uncertainty over the evolving geopolitical situation in Ukraine, which limited losses, dealers said. Losses were also limited due to the lack of fresh gilts supply in 2021-22 (Apr-Mar).
Today, yield on the 10-year benchmark 6.54%, 2032 bond is seen at 6.73-6.78%. (Shubham Rana)
India Gilts: Down on jump in crude; volumes muted in short week
NEW DELHI–1151 IST–Government bonds fell amid dismal trade today as traders trimmed their holdings tracking a sharp rise in Brent crude prices over the $100-per-bbl mark, due to renewed concern over oil supply from Russia, dealers said.
Brent crude oil futures were up 5% from Friday’s settlement price and topped the psychologically-crucial $103-per-bbl mark today after Russian President Vladimir Putin put his country’s nuclear forces on high alert amid the ongoing invasion of Ukraine.
Moreover, the Centre’s announcement of an additional 600 bln rupees of short-term borrowing through Treasury bills in March weighed on short-term gilts. Traders awaited the cut-offs at the first T-bill auction in March worth 380 bln rupees on Wednesday for cues on how much yields on short-term gilts would rise, dealers said.
However, losses were limited as traders kept to the sidelines lacking firm cues and due to uncertainty over the evolving geopolitical situation in Ukraine. Further, they avoided large bets in a curtailed trading week with a lack of fresh gilt supply, dealers said.
“What the T-bill issuance has given us is almost an assurance that we are not going to see any more gilt auctions, between the cash flows from this and the balances that the government seems to have,” a dealer at a private bank said.
Last week, some dealers had speculated that the Centre would have to borrow more through dated securities in March even after the scheduled gilt auctions ended last week, after it raised only 345 bln rupees in February against the scheduled amount of 950 bln rupees.
Today, yield on the 10-year benchmark 6.54%, 2032 bond is seen at 6.72-6.78%. (Aaryan Khanna)
India Gilts: Seen down on extra T-bill issuance Mar, jump in crude
NEW DELHI – Government bonds are seen opening lower after the Centre upped its short-term borrowing through Treasury bills for March, while traders may trim holdings tracking a sharp rise in crude prices in early trade today.
The government will borrow 1.86 trln rupees through issuance of Treasury bills in March, higher than the earlier scheduled amount of 1.26 trln rupees, it said in a release on Friday.
In the release, the government said it had modified the amount for issuance of Treasury bills during Mar 2-31 after reviewing its cash position and in consultation with the Reserve Bank of India.
Every week starting Mar 9, the Centre will raise 70 bln rupees through the 91-day T-bill, 150 bln rupees through the 182-day T-bill and 150 bln rupees through the 364-day T-bill, according to the revised calendar. This week, the government will raise 160 bln rupees through the 364-day paper, with the other amounts remaining the same.
Short-term gilt yields may rise sharply as short-term interest rates rise due to the excess supply. However, the jump may be limited as the extra supply of Treasury bills may be mopped up by investors due to a lack of supply over the past few weeks, dealers said.
Moreover, institutional investors such as mutual funds may deploy cash at yields starts to tick up, dealers said.
Global cues also turned adverse early in Asian trade today. Crude oil futures rose nearly 5% in early trade today due to heightened fears that oil supplies from Russia, among the world’s top producers of the commodity, could be disrupted.
The Brent crude futures contract for April delivery rose by over $4 per bbl from Friday’s settlement to $102.06 a bbl. Typically, a rise in crude oil prices increases risks of imported inflation in India and provides less room for the RBI to prolong its monetary policy accommodation.
On the other hand, prices may be supported as traders cover short bets due to the lack of further supply in dated securities, with the Centre’s scheduled borrowing programme through gilts at an end last week.
Additionally, the appetite for dated securities was apparent at the weekly gilt auction worth 230 bln rupees on Friday, with the government raising the notified amount without a devolvement or a cancellation for the first time since Dec 17.
Traders may keep to the sidelines in a truncated week as gilt supply dries up, with the Centre’s scheduled borrowing for this year having been completed, dealers said.
Money markets will be shut on Tuesday for Shivratri.
Today, yield on the 10-year benchmark 6.54%, 2032 bond is seen at 6.72-6.80%. (Aaryan Khanna)
US$1 = 75.44 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Deepshikha Bhardwaj
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