Informist, Thursday, Oct 27, 2022
By Shubham Rana
NEW DELHI – Prices of government bonds ended off the day’s highs as traders booked profits after the early rise in prices, dealers said. Prices surged early in the day as US Treasury yields fell sharply on Wednesday amid speculation that the Federal Reserve could slow down the pace of its interest rate hikes after November.
The 10-year benchmark 7.26%, 2032 bond closed at 98.94 rupees, or 7.41% yield, as against 98.73 rupees, or 7.44% yield, on Tuesday. The bond had touched a high of 99.24 rupees or 7.37% yield earlier in the day.
US Treasury yields slumped on Wednesday after soft economic data in the US hinted that the US economy was slowing in the face of high inflation and rising interest rates. This raised expectations that the Fed would lower the pace of interest rate hikes moving ahead.
The Fed is expected to raise rates by 75 basis points at its meeting next week, but investors hope it may hint at slowing the pace of monetary policy tightening in December.
The yield on the benchmark 10-year US Treasury note slumped to 4.04% on Wednesday from 4.18% at the close of Indian market hours on Tuesday. The yield rose to 4.07% today, which also weighed on domestic gilt prices, dealers said.
The 10-year US Treasury yield was at 4.07% at the end of Indian market hours today, down sharply from 4.28% at the Indian close on Friday.
A fall in US Treasury yields widens the interest rate differential between the safe-haven asset and emerging market debt, making the latter more appealing to foreign investors.
“The profit booking near the end of trade shows that the outlook is not very positive right now,” a dealer at a private bank said. “Traders don’t want to carry positions overnight when the US yields are so volatile.”
Volumes were muted today as traders stayed on the sidelines amid lack of significant cues, and because of low attendance at bank trading rooms in a curtailed trading week, dealers said.
Indian financial markets were closed on Monday for Diwali and on Wednesday for Balipratipada.
“US yields rose later in the day which also weighed on domestic gilts,” a dealer at a primary dealership said. “There is no auction on Friday this time, so I would expect the market to stay relatively steady, but any movement in US yields can play a part just like today.”
According to data on RBI’s Negotiated Dealing System – Order Matching platform, the market-wide turnover stood at 236.15 bln rupees, compared with 175.10 bln rupees on Tuesday.
OUTLOOK
On Friday, government bond prices may open steady as traders may keep to the sidelines amid lack of significant cues, dealers said.
Traders may take cues from any sharp movement in US Treasury yields and crude oil prices at open.
The yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.40-7.48%.
India Gilts: Remain sharply up tracking slump in US Treasury yields
NEW DELHI-–1350 IST–Prices of government bonds remained sharply higher tracking the steep fall in US Treasury yields on Wednesday, dealers said. However, the prices did give up some gains as the yield on the 10-year US Treasury note inched higher today.
The benchmark 10-year US Treasury yield rose to 4.07% during the day today after falling to 4.04% on Wednesday. It was at 4.18% at the close of Indian market on Tuesday.
US Treasury yields fell on Wednesday on view that the Federal Reserve might slow down the pace of interest rate hikes. Recent soft economic data from the US hinted that the country’s economy is slowing in the face of high inflation and rising interest rates.
“Right now, there is only US yield to track with no domestic factors at play,” a dealer at a private bank said. “Some traders must have booked profits after the sharp rise in early trade, which has brought down prices.”
Volumes were muted today as attendance was low at bank trading rooms in a curtailed week, dealers said. With no gilts auction on Friday, traders now await the outcome of the Federal Open Market Committee meeting next week, where the Fed is seen raising rates by 75 basis points.
During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.37-7.44%. (Shubham Rana)
India Gilts:Surge as US ylds fall on hope of slower rate hikes by Fed
NEW DELHI-–0940 IST–Prices of government bonds surged as US Treasury yields fell sharply on Wednesday amid speculation that the Federal Reserve may slow down the pace the of its interest rate hikes, dealers said.
Recent soft economic data in the US hinted that the US economy is slowing in the face of high inflation and rising interest rates, which then increased expectations that the Fed will tone down its aggressive stance on interest rate hikes.
While the Fed is expected to raise rates by 75 basis points at its meeting next week, investors are of the view that the US central bank may hint at slowing the pace of monetary policy tightening in December.
The yield on the benchmark 10-year US Treasury note slumped to 4.04% on Wednesday from 4.18% at the close of Indian market hours on Tuesday.
A fall in US Treasury yields widens the interest rate differential between the safe-haven asset and emerging market debt, making the latter more appealing to foreign investors.
“There are signs in the US that a recession is coming, and the Fed will have to slow the speed of their rate hikes,” a dealer at a state-owned bank said. “If the Fed does indeed hint at a slower rate hike in December, then it is certain that the Reserve Bank of India will only go for a 25 bps hike.”
The lack of fresh gilts supply this week also aided the rise in prices, dealers said.
During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.37-7.44%. (Shubham Rana)
India Gilts: Seen up as US ylds slump; rise in crude may cap gains
MUMBAI – Prices of government bonds are seen opening higher today, tracking a fall in the US Treasury yields, dealers said.
Today, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.37-7.44% as against 7.44% on Tuesday.
Indian financial markets were closed on Wednesday for Balipratipada.
US Treasury yields fell on Wednesday amid renewed speculation that the Federal Reserve may slow the pace of rate hikes moving forward.
The yield on the benchmark 10-year US Treasury note slumped to 4.04% on Wednesday from 4.18% at the close of Indian market hours on Tuesday.
The rise in crude oil prices may, however, limit the gains in gilt prices today, dealers said. Crude prices rose nearly 3% on Wednesday, led by record US crude exports and refiners operating at higher-than-usual levels for this time of year.
The Brent Crude Oil contract for December delivery rose to $95.69 per barrel on Wednesday from $93.52 per barrel on Tuesday.
Trade volumes may be muted as attendance at bank trading rooms remains low amid a truncated week, dealers said. (Nishat Anjum)
End
US$1 = 82.49 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Avishek Dutta
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