Informist, Thursday, Jun 1, 2023
By Anjali
NEW DELHI – Government bonds ended off the day’s high today as traders sold their gilt holdings at a profit after prices rose in early trade, dealers said. Some traders placed short bets ahead of the 330-bln-rupee auction on Friday, which further weighed on gilts.
Prices did not fall further as some traders stocked up ahead of the Reserve Bank of India Monetary Policy Committee’s meeting on Jun 6-8, dealers said.
The 10-year benchmark 7.26%, 2033 bond ended at 101.92 rupees, or 6.98% yield, against 101.88 rupees, or 6.99% yield on Wednesday.
At the auction, the government will sell 80 bln rupees of the 7.06%, 2028 bond; 140 bln rupees of the 7.26%, 2033 bond; and 110 bln rupees of the 7.36%, 2052 bond. “People are booking profit,” a dealer at a state-owned bank said. “It is healthy for the market as prices had risen quite a bit.”
Dealers speculated that prices rose in early trade because foreign banks bought gilts on behalf of insurance companies as they expected prices to rise future. Some offshore traders also stocked up on gilts today, dealers said.
Traders expect prices to rise further post the outcome of the Monetary Policy Committee’s meeting as the domestic rate-setting panel is seen continuing with the pause in interest rates.
The impact of higher-than-expected domestic GDP growth was offset by positive market sentiment, as traders do not see any indication of a rate hike, dealers said.
According to data released on Wednesday, India’s Jan-Mar GDP growth was 6.1%, against 4.0% a year ago. An Informist poll had estimated it at 5.1%. The GDP growth estimate for 2022-23 (Apr-Mar) was revised to 7.2% from 7.0% earlier.
The market had started pricing in rate cuts as soon as October, after the domestic rate-setting panel kept the repo rate unchanged at 6.50% in its last meeting in April. But the view changed after data suggested that the US Federal Reserve might hike funds rate by 25 basis points in June one last time before hitting pause, dealers said. Now, traders expect the RBI’s Monetary Policy Committee to start cutting rates in February.
“The market has been talking about rate cuts in last quarter (Jan-Mar) of the current year,” a dealer at another state-owned bank said. “However, the RBI won’t cut rates before Fed does, so there has to be at least an indication by Fed that they are going to cut rates, for RBI to even think about it.”
US Federal Reserve officials said on Wednesday that the central bank may “skip” a rate hike at its Jun 13-14 meeting. Now, about 66% of Fed fund futures traders expect the Fed to pause rates in June, against 36% on Wednesday, while the rest expect a 25-bps rate hike, according to CME FedWatch Tool.
According to data on RBI’s Negotiated Dealing System-Order Matching platform, the turnover today was 593.10 bln rupees, compared with 450.10 bln rupees on Wednesday. Meanwhile, trades aggregating 250 mln rupees were settled in five deals with the digital rupee today, as against 300 mln rupees settled in six deals on Wednesday.
OUTLOOK
On Friday gilts are seen opening lower as traders might place short bets ahead of 330-bln-rupee gilt auction.
The government will sell 80 bln rupees of the 7.06%, 2028 bond; 140 bln rupees of the 7.26%, 2033 bond; and 110 bln rupees of the 7.36%, 2052 bond.
Traders may track overnight movement in US Treasury yields and crude oil prices.
The yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.95-7.03%.
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Maheswaran Parameswaran
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 (11) 4220-1000
Send comments to [email protected]
© Informist Media Pvt. Ltd. 2023. All rights reserved.
Source: Cogencis
