Informist, Friday, Dec 16, 2022
By Nishat Anjum and Kasthuri Akhil
MUMBAI – Prices of government bonds ended lower today as traders trimmed their holding ahead of the 300-bln-rupee auction, dealers said.
The result of the auction was in line with market expectations, and failed to impact the market, dealers said.
The 10-year benchmark 7.26%, 2032 bond ended at 99.87 rupees, or 7.28% yield, as against 99.93 rupees, or 7.27% yield on Thursday.
The government sold 40 bln rupees of the 6.69%, 2024 bond; 60 bln rupees of the 7.10%, 2029 bond; 110 bln rupees of a new 2036 bond; and 90 bln rupees of the 7.40%, 2062 bond at the auction. The coupon on the new 2036 bond was set at 7.41%.
“People made space for the fresh supply before the auction, but as the auction result was on expected lines we didn’t see a lot of movement post the result,” a dealer at a primary dealership said.
“The market is stuck in a range of 7.23-7.34% yield (on the 10-year bond) and it is unlikely to move out of this range this month.”
With major events out of the way, the auction result was expected to provide cues to the market, dealers said. However, with the result on expected lines, traders avoided placing large bets. There are no cues for traders to bet on right now and foreign banks, too, have been away from the market as they typically tend to close their books towards the end of the year.
“After the event-heavy week and the auctions, traders would want to keep the portfolios light ahead of the weekend,” a dealer at a private bank said. “Lack of triggers and missing of foreign banks will keep the market range bound.”
Among on-the-run gilts, the 7.54%, 2036 gilt fell the most, as traders trimmed holdings for the fresh supply of the new 2036 bond.
Demand for long-term bonds has fallen in recent weeks as investors have instead stepped up purchases of corporate bonds, which are in large supply, dealers said.
“There is a huge supply of corporate bonds right now, which is why we are seeing poor demand for long-term bonds in the last two-three auctions,” a dealer at a private bank said. “This is expected to continue, and we will also have to see how the state loan auction calendar comes for Jan-Mar, which may also weigh on the demand from investors in long-term gilts.”
According to data on RBI’s Negotiated Dealing System – Order Matching platform, the turnover was 199.30 bln rupees today, compared with 250.40 bln rupees on Thursday.
Meanwhile, trades aggregating 1.35 bln rupees were settled with the digital rupee pilot in 17 deals, compared with 150 mln rupees in two deals on Thursday.
OUTLOOK
Gilts are not traded on Saturdays. On Monday, bond prices are seen steady as traders may stay on the sidelines due to lack of cues, dealers said.
Any significant movement in US Treasury yields and crude oil prices may also lend cues at open.
Yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.24-7.32%.
India Gilts: Dn; coupon on new 2036 bond on expected lines at 7.40%
MUMBAI—-1455 IST-—Government bond prices remained down after the result of the 300-bln-rupee auction, where the coupon on the new 2036 bond was set at 7.41%, in line with expectations, dealers said.
The government sold 40 bln rupees of the 6.69%, 2024 bond; 60 bln rupees of the 7.10%, 2029 bond; 110 bln rupees of a new 2036 bond; and 90 bln rupees of the 7.40%, 2062 bond at the auction today.
The coupon on the new 2036 bond was seen at 7.40%, according to an Informist poll.
The Reserve Bank of India set the cut-off price on the 2024 paper at 99.64 rupees or 6.94% yield; 99.09 rupees or 7.28% yield on the 2029 bond, while that on the 2062 bond was at 99.35 rupees or 7.45% yield.
The appetite for the 40-year gilt was firm today, at a higher yield, after two weeks of sub-par demand from long-term investors, dealers said.
“The cutoffs on the 2024 and 2029 bonds came in a tad bit lower than market expectations, while those on the new 2036 as well as on the 2062 bonds were on expected lines,” a dealer at a primary dealership said.
According to the Informist poll, the expected cut-off price on the 2024 paper was seen at 99.70 rupees, 99.14 rupees on the 2029 bond, and 99.47 rupees was the expected cut-off on the long term 2062 paper.
Volume rose after the auction result but was still low as foreign banks kept to the sidelines before the year-end closing of accounts, dealers said.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform, the market-wide turnover at 1430 IST was 130.30 bln rupees compared with 185.25 bln rupees at 1430 IST on Thursday.
During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.25-7.31%. (Kasthuri Akhil)
India Gilts: In thin band as traders await result of weekly auction
MUMBAI—-1230 IST–Government bond prices moved in a thin band, lower than the previous close, as traders awaited the result of the 300-bln-rupee weekly auction, dealers said.
The government offered to sell 40 bln rupees of the 6.69%, 2024 bond; 60 bln rupees of the 7.10%, 2029 bond; 110 bln rupees of a new 2036 bond; and 90 bln rupees of the 7.40%, 2062 bond at the auction at 1030-1130 IST.
Some dealers said that expectations of high coupon on the new 2036 bond hurt market appetite for the 2024 and 2029 bonds at current market levels. The coupon on the new 2036 bond was seen at 7.40%, according to a poll of 15 bond market dealers Informist. In the ‘when-issued’ trade segment, the bond was last quoted at 7.36-7.54%.
“Demand at the auction was a bit weak because of the new 2036 bond,” a dealer at a state-owned bank said. “Traders are expecting high coupon on the new bond.”
Towards the end of bidding, state-owned banks may have stepped up their bids for the new gilt at an attractive coupon, dealers said. The current 14-year 7.54%, 2036 bond was at 101.30 rupees or 7.38% yield.
However, the appetite for the 40-year gilt at a higher yield was satisfactory after two weeks of sub-par demand from long-term investors, dealers said.
Some traders were of the view that there was firm demand for the 2024 bond from a private sector bank, dealers said.
Gilt prices moved in a narrow band as the market lacked significant cues after the event-heavy week, which had been priced into gilts, dealers said.
Volume was lacklustre ahead of the auction results, and foreign banks kept to the sidelines before the year-end closing of accounts, dealers said.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform, the market-wide turnover at 1230 IST was 57.90 bln rupees compared with 119.35 bln rupees at 1230 IST on Thursday.
During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.25-7.30%. (Anjali and Kasthuri Akhil)
India Gilts: Down on caution ahead of 300-bln-rupee weekly auction
MUMBAI–0945 IST–Prices of government bonds were down as traders trimmed their holdings due to caution ahead of the 300-bln-rupee weekly auction, dealers said.
The government has offered to sell 40 bln rupees of the 6.69%, 2024 bond; 60 bln rupees of the 7.10%, 2029 bond; 110 bln rupees of a new 2036 bond; and 90 bln rupees of the 7.40%, 2062 bond.
The market has already factored in the important events of the week, and the auction is the only prominent trigger remaining, dealers said. The November CPI inflation data for India and the US was released this week. The central banks of the US, Europe and England also announced their policy decisions this week.
Volumes remained low today as traders kept to the sidelines ahead of the result of the weekly auction, dealers said.
“The cut-off at the auction is expected to drive the market today,” a dealer at a primary dealership said. “The yield on the 10-year benchmark bond will remain range-bound at around 7.30%-7.32%, not beyond that.”
Demand is expected to be firm at the auction, particularly for the 2024 and 2029 gilts. Traders are expected to cover their short bets placed in the run-up to the debt sale, dealers said.
Meanwhile, investors are seen demanding a high coupon, at around 7.40%, on the new 2036 bond, dealers said. State-owned banks are unlikely to bid for the gilt below that level, dealers said.
According to data on the RBI’s Negotiated Dealing System–Order Matching platform, market-wide turnover was 18.05 bln rupees at 0945 IST compared with 54.15 bln rupees at 0955 IST on Thursday.
During the day, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.24-7.30%. (Anjali)
India Gilts: Seen steady; traders may cover short bets at auction
MUMBAI – Government bond prices are seen steady today as traders may stay on the sidelines before a 300-bln-rupee auction. Gilts have now priced in data from an event-heavy week and the market is looking at the debt sale for further triggers, dealers said.
The government has offered to sell 40 bln rupees of the 6.69%, 2024 bond; 60 bln rupees of the 7.10%, 2029 bond; 110 bln rupees of a new 2036 bond; and 90 bln rupees of the 7.40%, 2062 bond.
Today, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.24-7.30%, as against 7.27% on Thursday.
Traders are expected to cover their short bets at the debt sale, reducing the chances of devolvement on primary dealers.
Demand from investors for the short-term paper is seen firm as the market bets on the Reserve Bank of India’s Monetary Policy Committee reaching its peak rate soon, dealers said.
However, investors may demand a high coupon on the new 2036 bond, dealers said. Early estimates point to the coupon being set at 7.39-7.40% against the 7.38% yield on the current 7.54%, 2036 bond on Thursday, dealers said.
The new paper was quoted at 7.33-7.39% in ‘when-issued’ trade on Thursday.
The market would refrain from tracking global cues before the auction, particularly after the steep fall in prices on Thursday, dealers said. (Nishat Anjum)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Ashish Shirke
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