Informist, Tuesday, May 31, 2022
By Shubham Rana
NEW DELHI – Government bonds recovered most losses today and ended largely unchanged compared with Monday as traders covered their short positions on caution before the GDP and fiscal deficit data, scheduled to be released later today.
Also, investors stepped up purchases of the 10-year benchmark 6.54%, 2032 bond near the technical resistance of 7.45%-yield level, dealers said.
The 10-year benchmark 6.54%, 2032 bond settled at 94.04 rupees, or 7.42% yield, against 94.08 rupees, or 7.41% yield on Monday.
Traders awaited GDP data for Jan-Mar as well as the government’s fiscal deficit for 2021-22 (Apr-Mar) and the month of April.
Centre’s fiscal deficit for financial year ended March was 6.7% of GDP, against 6.9% of the Budget target. The fiscal deficit for April came in at 4.5% of the 16.612 trln rupees of the 2022-23 (Apr-Mar) target, data released after market hours showed.
Meanwhile, India’s GDP growth is likely to have moderated to 4.1% in the March quarter, according to the median of 22 economists polled by Informist.
“Unless there is a huge deviation from estimates in GDP data today, I think market should not react aggressively on Wednesday,” a dealer at a private bank said. “Despite this, people are covering their positions before the data comes.”
“The GDP data is important as it will give us an idea on what the central bank may do next week at the policy,” a dealer at a state-owned bank said.
While the numbers are unlikely to have a significant impact on yields, growth figures may influence the Monetary Policy Committee’s decision on aggressive rate hikes when it meets next week, dealers said.
Earlier in the day, bonds fell sharply tracking a rise in crude oil prices as well as US Treasury yields, dealers said.
The Brent crude contract for August surged past $119 a bbl today, while the yield on the 10-year benchmark US Treasury note rose to 2.85%.
Brent crude futures rose over 1.5% on Monday as concerns over a demand-supply mismatch continued to grow. Oil demand in China is expected to pick up after Shanghai begins winding up lockdowns on Wednesday, while European policymakers are set to ban Russian crude oil.
US yields rose after Federal Reserve Governor Christopher Waller called for a half percentage point hike in interest rates until inflation is controlled. Traders also awaited details from Fed Chairman Jerome Powell’s meeting with the US President Joe Biden later in the day to discuss the state of the economy.
According to data on RBI’s Negotiated Dealing System – Order Matching platform, the market-wide turnover was 341.15 bln rupees compared with 267.30 bln rupees on Monday.
OUTLOOK
On Wednesday, government bonds are seen taking cues from the GDP data for Jan-Mar, to be released later today.
Traders may maintain caution ahead of the Monetary Policy Committee meeting next week, with the Reserve Bank of India’s rate setting panel seen focused on controlling inflation rather than focusing on growth.
Meanwhile, government’s fiscal deficit data for 2021-22 (Apr-Mar) came in better than Budget estimates, which may support bond prices on Wednesday.
Centre’s fiscal deficit for financial year ended March was 6.7% of GDP, against 6.9% of the Budget target, data released after market hours showed.
India’s GDP growth is likely to have moderated to 4.1% in the March quarter, according to the median of 22 economists polled by Informist.
Traders will also keep an eye on any sharp movements in crude oil prices or US Treasury yields for triggers.
The yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.38-7.46%.
India Gilts: Off lows tracking fall in 10-yr US yld from day’s high
NEW DELHI–1340 IST–Government bonds recovered some losses tracking an intraday fall in US Treasury yields. Moreover, technical resistance on the 10-year benchmark 6.54%, 2032 bond near the 7.45% yield level led to a recovery in bond prices, dealers said.
“7.45% is the next resistance for the 10-year yield and since it has consistently bounced off that mark, shorts are covering again since it doesn’t look like today’s the day that it will break,” a dealer at a private bank said.
The yield on the 10-year US Treasury note fell 2.80%, sharply down from the day’s high of 2.85%.
US yields had risen after Federal Reserve Governor Christopher Waller called for a half percentage point hike in interest rates until inflation is controlled. Traders also await details from Fed Chairman Jerome Powell’s meeting with the US President Joe Biden later in the day to discuss the state of the economy.
Domestic bonds had slumped earlier as traders trimmed their holdings due to a sharp rise in US Treasury yields and crude oil prices.
Traders avoided placing aggressive bets on caution ahead of the release of the GDP data for Jan-Mar as well as the government’s fiscal deficit for 2021-22 (Apr-Mar) and the month of April.
India’s GDP growth is likely to have moderated to 4.1% in the March quarter, according to the median of 22 economists polled by Informist.
While the numbers are unlikely to have a significant impact on yields, growth figures may influence the Monetary Policy Committee’s decision on aggressive rate hikes when it meets next week, dealers said.
During the day, the yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.38-7.45%. (Shubham Rana)
India Gilts: Sharply down on jump in US yields, crude; GDP data eyed
NEW DELHI–1010 IST–Government bonds slumped as traders trimmed their holdings due to a sharp rise in US Treasury yields and crude oil prices ahead of the release of key economic data after market hours, dealers said.
Globally, risk sentiment picked up as China announced it would begin easing COVID-induced lockdowns in Shanghai from Wednesday.
The Brent crude contract for August surged past $119 a bbl in Asian trade, up over 3% from Friday, while the yield on the 10-year benchmark US Treasury note was up 9 bps at 2.84%.
“US yields were providing a buying cushion ever since they retraced from the 3% mark (on the US 10-year yield). Now that global factors have been negative, the bonds have taken a beating again,” a dealer at a foreign bank said.
Investors stepped up purchases of the 6.54%, 2032 bond as the 10-year benchmark yield approached the psychologically-crucial 7.45% mark, dealers said.
Trade volumes were dull ahead of the release of GDP and fiscal deficit data for 2021-22 (Apr-Mar), scheduled to be released after market hours today, dealers said.
Traders placed short bets in the 5.74%, 2026 bond ahead of its auction this week. The government has offered to sell 90 bln rupees of the 5.74%, 2026 gilt, 40 bln rupees of the 2028 floating rate bond, 100 bln rupees of the 7.54%, 2036 gilt and 90 bln rupees of the 6.99%, 2051 gilt on Friday.
Moreover, short-term gilts were out of favour as the Monetary Policy Committee is widely expected to hike the repo rate by 50 bps at the policy review next week, dealers said.
During the day, the yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.38-7.46%. (Aaryan Khanna)
India Gilts: Seen down on jump in US yields, crude; GDP data eyed
NEW DELHI – Government bonds are seen opening lower tracking a sharp rise in US Treasury yields and Brent crude oil, even as traders may avoid large bets ahead of key domestic data to be released after market hours today.
US Treasury yields jumped in early Asian trade, as haven assets fell out of favour on improved risk sentiment, in addition to fresh concerns about inflation requiring sharp action by central banks after Germany’s CPI inflation climbed to a fresh record high in May.
The yield on the 10-year benchmark US Treasury note rose by 9 basis points to 2.84% in Asian trade today. A rise in
US Treasury yields narrows the interest rate differential between the haven asset and emerging market debt, making the latter less appealing to foreign investors.
Brent crude futures rose over 1.5% on Monday as concerns over a demand-supply mismatch continued to grow. Oil demand in China is expected to pick up after Shanghai begins winding up lockdowns on Wednesday, while European policymakers are set to ban Russian crude oil.
The Brent crude contract for August delivery jumped to $118.75 a bbl in Asian trade today, over $3 a bbl higher since Friday. The contract was not settled on Monday due to a public holiday in the US on account of Memorial Day.
Losses may be limited as the yield on the 10-year benchmark 6.54%, 2032 bond approaches the psychologically-crucial 7.45% mark, at which investors may step up purchases, dealers said.
Traders await the release of the GDP data for Jan-Mar as well as the government’s fiscal deficit for 2021-22 (Apr-Mar) and the month of April, scheduled after market hours today.
India’s GDP growth is likely to have moderated to 4.1% in the March quarter, according to the median of 22 economists polled by Informist.
While the numbers are unlikely to have a significant impact on yields, growth figures may influence the Monetary Policy Committee’s decision on aggressive rate hikes when it meets next week, dealers said.
Today, the yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.37-7.45%, as against 7.41% on Monday. (Aaryan Khanna)
End
US$1 = 77.6400 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Arshad Hussain
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