Informist, Wednesday, Nov 23, 2022
By Kasthuri Akhil
MUMBAI – Prices of government bonds ended slightly lower today as traders kept to the sidelines ahead of the release of the minutes of the US Federal Open Market Committee’s meeting, dealers said. The minutes will be released past midnight.
The 10-year benchmark 7.26%, 2032 bond closed at 99.77 rupees, or 7.29% yield, against 99.81 rupees, or 7.29% yield, on Tuesday.
Domestic market participants did not pay much heed to any movement in global factors including the US Treasury yields and crude oil prices as they awaited comments from officials of the Federal Reserve’s rate-setting panel, dealers said.
The Fed’s next hike is expected to determine the rate trajectory in India. Some traders expect the commentary to focus on aggressive inflation control, in line with remarks from US Fed Chair Jerome Powell immediately after the November review, dealers said.
If the comments point to a sharp rate hike of 75 basis points at the next US policy meet outcome on Dec 15, the Reserve Bank of India’s Monetary Policy Committee may opt for a 50-bps rate increase on Dec 7, dealers said.
“The market is looking forward to our own Monetary Policy Committee meeting in December,” a dealer at a private bank said. “Market is discounting a 35 bps rate hike and is watching out for any further guidance by the RBI.”
Gilt prices moved in a narrow band as trade volume remained dull through the day.
Trade was disrupted in the morning due to a technical glitch on the Negotiated Dealing System – Order Matching platform. Traders from some banks were unable to place bids on the platform after 0905 IST.
After a handful of deals struck early, there were no trades in the market between 0943 IST and 1013 IST. The Clearing Corp of India was able to fix the issue after about an hour and the glitch did not re-occur, dealers said.
After normal trade resumed, some traders placed short bets when the 10-year benchmark 7.26%, 2032 bond hit day’s high of 99.89 rupees. When gilt prices edged lower, they booked profit towards the close of trade, limiting losses in the 2032 bond, dealers said.
The domestic market sentiment was subdued due to lack of any significant triggers ahead of the scheduled release of the minutes, seen crucial in the near-term rate view, dealers said.
Some market participants expect the RBI to slow down its pace of rate hikes and even pause the rate hike cycle going forward if the comments from US Fed officials indicate softer US rate increases.
Crude oil prices did not impact the government bond market today, as the Brent crude contract for January delivery remained under $90 per barrel, dealers said. Dealers were wary of oil producing countries pursuing production cuts, as threatened by Saudi Arabia, the world’s largest crude exporter.
“If some rally happens in the US Treasury yields post the release of the Fed’s minutes, the yield on the benchmark 10-year bond in the domestic market will go to 7.20% level or beyond,” a dealer at a state-owned bank said.
“Any output cut in crude oil will result in central banks around the globe pursuing aggressive rate hikes,” the dealer said.
According to data on RBI’s Negotiated Dealing System – Order Matching platform, the market-wide turnover was 172.90 bln rupees compared with 242.60 bln rupees on Tuesday.
Meanwhile, trades aggregating 3.20 bln rupees were settled with the pilot digital rupee in 28 deals today, against 4.15 bln rupees in 37 deals on Monday.
OUTLOOK
On Thursday, bond prices are seen taking cues from the minutes of the meeting of the US Federal Open Market Committee’s November meeting.
The Federal Reserve’s next hike is expected to impact the rate trajectory in India. Some traders expect the commentary to focus on aggressive inflation control.
Any significant movement in the US Treasury yields and crude oil prices may lend cues at open.
Yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.25-7.33%.
India Gilts: Little changed; volume thin as traders eye FOMC minutes
MUMBAI–1420 IST–Prices of government bonds moved in a narrow band, with trade volume thin as traders kept to the sidelines, awaiting fresh commentary on the direction of interest rates in the US, dealers said.
Minutes of the US Federal Open Market Committee’s meeting in November, due past midnight, are expected to provide cues on the US Federal Reserve’s path of monetary policy tightening, with inflation well above the US central bank’s 2% long-term target. In October, CPI inflation in the US was 7.7% on year.
The US interest rate trajectory is seen paving the way for the course of rate hikes in India, dealers said.
“The market is of the opinion if the minutes of the Fed’s monetary policy meeting reflect a hawkish stand, the Reserve Bank of India will follow suit and hike the repo rate by 50 basis points,” said a dealer at a state-owned bank. “Domestic market participants are bearish as of now and will look to cover short bets at the weekly auction on Friday.”
At the weekly gilt auction on Friday, the government will sell 70 bln rupees of the 7.38%, 2027 bond; 120 bln rupees of the 7.26%, 2032 bond; and 90 bln rupees of the 7.36%, 2052 bond.
As of now, traders are not tracking the movement in crude oil prices aggressively, as the Brent crude contract for January delivery remained under $90 a bbl, dealers said.
An overnight fall in the benchmark 10-year US Treasury yield to 3.76% on Tuesday from 3.83% on Monday helped limit losses in gilts.
According to data on the Reserve Bank of India’s Negotiated Dealing System – Order Matching platform, the market-wide turnover was at 123.65 bln rupees compared with 188.05 bln rupees as of 1430 IST.
During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.24-7.32%. (Kasthuri Akhil)
India Gilts: Steady ahead of weekly auction, FOMC minutes eyed
NEW DELHI–1013 IST–Prices of the government bonds were steady ahead of the release of the minutes of the Federal Open Market Committee’s meeting, dealers said. The minutes will be released past midnight.
Some banks were facing a technical glitch on the Negotiated Dealing System – Order Matching platform, which disrupted trade and kept volume low, dealers said. There were no trades in the market between 0943 IST and 1013 IST.
“Traders who logged in after 0900 IST are not able to trade, while the early birds placed a few trades,” a dealer at a private bank said. “Since this is a widespread issue, no one wants to enter fresh positions as they don’t have the ability to square them off.”
Before the pause in trade, gilt prices moved in a narrow range.
Traders were cautious as a hawkish stand by the Fed may in turn compel the Reserve Bank of India to hike repo rate aggressively to arrest a sharp depreciation in the rupee against dollar, dealers said.
Appetite for gilts was muted after the yield on the 10-year benchmark 7.26%, 2032 bond fell under the 7.30% mark, dealers said.
“Traders might place short bets today after a certain level,” a dealer at a state-owned bank said.
A fall in US Treasury yields overnight may spur some purchases, dealers said. The benchmark 10-year US Treasury yield fell 7 basis points to 3.76% on Tuesday.
Traders are not looking at the movement in Brent crude tooday as the January contract is moving within the $85-90 a barrel range, the level that has prevailed over the past month, dealers said. The Brent crude contract for January delivery rose 1% on Tuesday.
According to data on RBI’s Negotiated Dealing System – Order Matching platform, the market-wide turnover at 0950 IST was at 7.85 bln rupees, compared with 31.35 bln rupees at 0950 IST on Tuesday.
During the day, yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.24-7.32% as against 7.29% on Tuesday. (Anjali)
India Gilts: Seen up on overnight fall in US ylds; FOMC minutes eyed
NEW DELHI – Prices of government bonds are expected to open higher tracking an overnight fall in US Treasury yields, which also pushed up bond prices near the close of trade on Tuesday, dealers said.
Market sentiment was positive because of the positive global cues, but trade volume may be dull due to lack of significant domestic triggers, dealers said.
Today, yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.24-7.32% as against 7.29% on Tuesday.
The benchmark 10-year US Treasury yield fell 7 basis points to 3.76% on Tuesday as investors await the Federal Open Market Committee meeting minutes, scheduled for release today. US Treasuries will not be traded in Asia today because of a holiday in Japan.
Traders await more cues on the path of interest rate hikes in the world’s largest economy, which is expected to guide the Reserve Bank of India’s pace of monetary policy tightening, dealers said.
Cleveland Federal Reserve President Loretta Mester, a voting member on the US Federal Open Market Committee in December, said she supported slowing down the pace of rate hikes even as more increases were needed to bring inflation in the US under control.
Gains may be capped on caution ahead of the 280-bln-rupee weekly gilt auction Friday. The government will sell 70 bln rupees of the 7.38%, 2027 bond; 120 bln rupees of the 7.26%, 2032 bond; and 90 bln rupees of the 7.36%, 2052 bond on Friday. (Anjali)
End
US$1 = 81.85 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Arshad Hussain
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