Informist, Wednesday, Jun 29, 2022
By Shubham Rana
NEW DELHI – Prices of most government bonds ended slightly higher today because of a fall in US Treasury yields and the 5-year overnight indexed swap rate. However, a rise in crude oil prices near the end of trade limited gains, dealers said.
The 10-year benchmark 6.54%, 2032 bond settled at 93.80 rupees, or 7.46% yield, as against 93.75 rupees, or 7.47% yield on Tuesday.
Bond prices fell earlier in the day as traders placed short bets ahead of the 320-bln-rupee weekly gilt auction on Friday, dealers said. The government has offered to sell 90 bln rupees of the 7.38%, 2027 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 this week.
During the day, bond prices rose as the 5-year overnight indexed swap rate and the US Treasury yields came down, dealers said.
The 5-year OIS fell to as low as 6.90% from 7.00% on Tuesday as traders received fixed rates noting a fall in US yields, dealers said.
The yield on the 10-year benchmark US Treasury note fell to 3.12% today on worries of a slowdown in US economy after US consumer confidence fell in June as the Federal Reserve rushes to control inflation.
Crude oil prices rose near the end of Indian market hours, which limited the gains in bond prices, dealers said. The Brent crude oil contract for September delivery fell to $112.67 per barrel but later rose to $118 per bbl, against Tuesday’s close of $113.80 a bbl.
“Bonds moved in tandem with the rise and fall in US yields and crude prices,” a dealer at a private bank said. “When crude was down, bonds rose but when it rose, bonds came down.”
Traders were cautious ahead of the end of the Apr-Jun quarter on Thursday, to protect the valuations of their gilt portfolios, which kept trade volumes low, dealers said. A lack of significant domestic cues also kept traders on the sidelines, dealer said.
“As long as there is no big news in the domestic market, bonds will continue to track global factors and volumes will stay low,” a dealer at another private bank said.
According to data on the RBI’s Negotiated Dealing System – Order Matching platform, the market-wide turnover was 232.95 bln rupees, compared with 174.90 bln rupees on Tuesday.
OUTLOOK
On Thursday, government bonds are seen taking cues at open from any sharp movement in crude oil prices and US Treasury yields.
Traders may look to make space for the fresh 320-bln-rupee supply on Friday. The government has offered to sell 90 bln rupees of the 7.38%, 2027 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.
Traders may also remain wary of placing large bets ahead of the end of the Apr-Jun quarter on Thursday, dealers said.
The yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.43-7.51%.
India Gilts: Rise as 5-year OIS down tracking fall in US yields
NEW DELHI–1335 IST–Government bond prices rose, overturning earlier losses, as the 5-year overnight indexed swap rate fell tracking a decline in US Treasury yields, dealers said.
The 5-year OIS fell to 6.90% from 7.00% on Tuesday as traders received fixed rates noting a fall in US yields, dealers said.
The yield on the 10-year benchmark US Treasury note fell to 3.12% today on worries of a slowdown in US economy after US consumer confidence fell in June as the US Federal Reserve rushes to control inflation.
Crude oil prices also fell today on concerns about a global economic slowdown. The Brent crude contract for September delivery fell to $112.67 per barrel, against Tuesday’s close of $113.80 a bbl.
“Every day you see our market taking cues from movement in crude and US Treasury yields and as US yields fell today, bond prices rose,” a dealer at a primary dealership said.
Gains were limited as traders placed short bets ahead of the 320-bln-rupee auction on Friday. The government has offered to sell 90 bln rupees of the 7.38%, 2027 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 this week.
During the day, the yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.41-7.47%. (Shubham Rana)
India Gilts: Tad down on short bets; erase early gains from crude fall
NEW DELHI–0950 IST–Government bond prices were a tad lower today, erasing early gains as traders placed short bets ahead of the 320-bln-rupee weekly gilt auction on Friday, dealers said.
The government has offered to sell 90 bln rupees of the 7.38%, 2027 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 this week.
The 7.54%, 2036 bond fell the most as traders made room for its fresh issuance. Dealers were also more confident of placing short bets in the bond as its trade volumes exceeded that of the 6.67%, 2035 paper.
Losses were limited as traders were cautious to take aggressive bets ahead of the end of the Apr-Jun quarter on Thursday, to protect the valuations of their gilt portfolios, dealers said.
Moreover, traders were wary of an aggressive path of rate hikes by the European Central Bank, which has not raised rates so far from pandemic-era lows, after a larger-than-expected rate increase by Hungary’s central bank on Tuesday, dealers said.
“People will start punting on higher ECB hikes and then higher Fed hikes after Hungary’s rate action,” a dealer at a foreign bank said. “The downward move has started from primary dealers before the auction.”
Gilts had gained earlier after Brent crude prices reversed overnight gains in Asian trade today, dealers said. Brent crude for August delivery fell under $117 a bbl, as against $117.24 a bbl at the end of Indian market hours on Tuesday.
During the day, the yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.44-7.52%. (Aaryan Khanna)
India Gilts: Seen down on rise in crude; caution before qtr ends Thu
NEW DELHI – Government bond prices are seen opening lower tracking an overnight rise in crude oil prices. However, traders may avoid taking aggressive bets before the end of the Apr-Jun quarter on Thursday to protect the valuations of their gilt portfolios, dealers said.
Crude oil settled higher on Tuesday as major producers Saudi Arabia and the United Arab Emirates looked unlikely to increase oil production significantly with their spare capacity to boost supply.
The commodity rallied for a third day as concerns about its supply persisted after the Group of Seven countries agreed to explore ways to cap the price of Russian oil at their ministerial meet this week.
Brent crude for August delivery rose 2.5% on Tuesday to settle at $117.98 a bbl. Typically, a rise in crude oil prices increases the risk of imported inflation in India and puts more pressure on the Reserve Bank of India to withdraw monetary policy accommodation.
Investors may step up purchases at the yield on the 10-year benchmark 6.54%, 2032 bond approaches the psychologically-crucial 7.50% mark, dealers said.
Buys are not expected to be aggressive, with large investors already staring at massive mark-to-market losses and unwilling to add to their portfolios, dealers said.
The 10-year benchmark yield has risen 62 basis points so far in Apr-Jun.
Any dispensation from the RBI to increase the appetite for gilts, either through potential amortisation of mark-to-market losses or increasing the held-to-maturity cap, is unlikely to materialise before Thursday, dealers said.
Today, the yield on the 10-year benchmark 6.54%, 2032 bond is seen at 7.44-7.52%, as against 7.46% on Tuesday. (Aaryan Khanna)
End
US$1 = 78.97 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Aditya Sakorkar
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