Informist, Tuesday, Dec 13, 2022
By Anjali
MUMBAI – Prices of government bonds rose today because India’s headline retail inflation for November was softer-than-expected, which increased expectations of a moderate rate hike by the Reserve Bank of India’s Monetary Policy Committee in February, dealers said.
The 10-year benchmark 7.26%, 2032 bond ended at 99.95 rupees, or 7.27% yield, as against 99.75 rupees or 7.29% yield on Monday.
India’s annual inflation rate based on CPI fell to an 11-month low of 5.88% in November from 6.77% in October due to a fall in food prices and a higher base effect, government data showed.
The November CPI print was lower than the estimate of 6.4% in an Informist poll, and was below the upper band of the RBI’s 2-6% comfort range for the first time in 11 months.
Some traders now expect the Monetary Policy Committee to pause rate hikes at its next meeting, while others were of the view that the panel will hike rates by only 25 basis points at its next meeting in February before pausing.
However, the overnight rise in crude oil prices and US Treasury yields limited gains in domestic gilt prices.
Crude oil prices settled higher on Monday as the Keystone pipeline between the US and Canada remained closed, threatening to tighten supply to the largest consumer of crude in the world.
US Treasury yields rose on Monday on caution ahead of a slew of key events. The US CPI print for November is scheduled to be released today, while the US Federal Reserve’s policy decision is scheduled for early Thursday.
The yield on the benchmark 10-year US paper rose 4 bps to 3.61% on Monday. Brent crude oil for February delivery rose 2% on Monday to $77.99 per barrel.
“The CPI data was the biggest reason for the movement in the market today, but we will have to see how US CPI comes and then what happens at the FOMC meeting,” a dealer at a private bank said.
The gains in gilt prices were also capped on caution ahead of US CPI data to be released after market hours today, dealers said. The inflation data is seen key to the pace of the US Federal Reserve’s policy tightening.
Analysts expect November core inflation in the US to be steady at 0.3% on month, but see a moderation in the annual pace, with headline prices seen rising 7.3% as against 7.7% last year, according to a Reuters poll.
“Traders expect US CPI to be on the higher side because all the data in the last month came out higher than expected and point to a heating economy,” a dealer at a state-owned bank said. “The market is expecting a 0.3% increase in US CPI. If it comes out to be more, it will trigger a view change.”
Economists widely expect the Fed to raise rates by 50 basis points when the meeting concludes on early Thursday. So far this year, the Federal Open Market Committee has raised its policy rate by 375 bps, including four straight 75-bps hikes.
According to data on RBI’s Negotiated Dealing System – Order Matching platform, the turnover was 240.80 bln rupees today, compared with 134.90 bln rupees on Monday.
Meanwhile, trades aggregating 1.50 bln rupees were settled with the digital rupee pilot in 15 deals, compared with 700 mln rupees in nine deals on Monday.
OUTLOOK
On Wednesday, government bond prices are seen taking cues from the US CPI data, scheduled to be released today after market hours.
Traders may keep to the sidelines ahead of the US Federal Open Market Committee meeting decision on Thursday.
Any significant movement in 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 7.22-7.32%.
India Gilts: Up on lower-than-expected CPI; US CPI, FOMC meet eyed
MUMBAI–1330 IST–Prices of government bonds remained high as India’s CPI inflation fell to an 11-month low of 5.88% in November, dealers said.
The November CPI print came in lower than the estimate of 6.4% in an Informist poll, and fell below the upper band of the 2-6% comfort range for the first time in 11 months.
The latest headline inflation reading increased traders’ expectations that the Reserve Bank of India’s Monetary Policy Committee may pause hiking interest rates at its next meeting in February.
“There was not much reaction in the market even after the lower-than-expected inflation data because core CPI is still above 6%, which remains a worry,” a dealer at a state-owned bank said.
Trade was a little subdued as traders kept to the sidelines awaiting the release of the US CPI data and the Federal Reserve Open Market Committee’s meeting outcome, dealers said.
The US inflation data is scheduled to be released after market hours today, while the FOMC decision will be out on Thursday.
A quarter of Fed funds’ rate traders see the FOMC hiking rates by 75 basis points for the fifth consecutive time on Thursday. The majority view, however, is of a 50-bps increase, according to CME Group’s FedWatch tool.
The Fed’s rate decision is expected to guide the RBI’s Monetary Policy Committee rate decision at its next policy review in February, where the panel is seen raising rates by 25 bps, according to an Informist poll.
Along with the quantum of the rate hike, the Fed’s commentary on the future path of rate hikes will also be key for the domestic gilts market, dealers said.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform, the market-wide turnover at 1330 IST was 157.00 bln rupees compared with 74.70 bln rupees at 1315 IST on Monday.
During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.24-7.30%. (Kasthuri Akhil)
India Gilts: Up as Nov CPI below view; US yld, crude rise cap gains
MUMBAI–0955 IST–Prices of government bonds opened higher after India’s retail inflation for November came in better than expected, dealers said. However, the gains were limited due to a rise in crude oil prices and US Treasury yields.
India’s annual inflation rate based on CPI fell to an 11-month low of 5.88% in November from 6.77% in October due to a fall in food prices and a higher base effect, government data showed.
“The market is well-behaved after November inflation data, but the rise in Brent crude prices and US Treasury yields are limiting the gains,” a trader at a primary dealership said.
Some dealers now expect the Monetary Policy Committee to pause rate hikes immediately as CPI inflation had come in the Reserve Bank of India’s medium-term target band of 2-6% for the first time in 11 months. Others were of the view that the panel will hike rates by only 25 basis points at its next meeting in February before pausing.
Crude oil prices settled higher on Monday as the Keystone pipeline between the US and Canada remained closed, threatening to tighten supply to the largest consumer of crude in the world. US Treasury yields rose on Monday on caution ahead of a slew of key events. The US CPI print for November is scheduled to be released today, while the US Fed’s policy decision and commentary are scheduled for early Thursday.
The yield on the benchmark 10-year bond rose 4 basis points to 3.61% on Monday. Brent crude for February delivery rose 2% on Monday to $77.99 per bbl, and was further up at $78.80 per bbl in Asian trade today.
The gains in gilt prices may also be capped on caution ahead of US CPI data to be released today after market hours, dealers said. The inflation data is seen key to the pace of the US Federal Reserve’s policy tightening.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform, the market-wide turnover at 0955 IST was 68.85 bln rupees compared with 12.80 bln rupees at 0950 IST on Monday.
During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.23-7.30%. (Anjali)
India Gilts: Seen sharply up after better-than-expected Nov CPI data
MUMBAI – Prices of government bonds are expected to open sharply higher after India’s CPI inflation for November came in better than expected, dealers said.
Today, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.22-7.27% as against 7.29% on Monday.
India’s annual inflation rate based on CPI fell to an 11-month low of 5.88% in November from 6.77% in October, data released by the National Statistical Office showed. The fall in the CPI print was primarily due to a decline in the prices of food items and a higher base effect.
According to the median of an Informist poll of 20 economists, India’s CPI inflation for November was seen at 6.4%.
With CPI inflation returning to the Reserve Bank of India’s target band of 2-6% for the first time since December 2021, traders see the Monetary Policy Committee not hiking the repo rate by more than 25 basis points at its next meeting in February, dealers said.
Some dealers were also of the view that the rate-setting panel may opt for a pause in rate hikes as the focus shifts to supporting growth. Industrial production contracted 4.0% in October, crashing to a 26-month low.
Further, gilt prices may trade in a thin band today and the gains may be capped due to caution ahead of the release of the US CPI data, due after market hours, and the Federal Open Market Committee’s policy decision on Thursday. (Nishat Anjum)
End
US$1 = 82.81 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Aditya Sakorkar
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to [email protected]
© Informist Media Pvt. Ltd. 2022. All rights reserved.
Source: Cogencis
