Informist, Monday, Jan 2, 2023
By Kasthuri Akhil
MUMBAI – Government bond prices ended off lows as traders stepped up purchases of the 10-year benchmark bond at the psychologically crucial 7.35% yield, dealers said. A rise in US Treasury yields and crude oil prices weighed on gilts, dealers said.
The 10-year benchmark 7.26%, 2032 bond ended at 99.44 rupees, or 7.34% yield, against 99.53 rupees, or 7.33% yield on Friday. The benchmark yield ended at its highest since Nov 10.
Through December, firm investor demand had capped the 10-year benchmark yield at 7.33%, and traders viewed the levels today as lucrative to add to their portfolios, dealers said.
“There was technical support at 7.36% yield level on the 10-year benchmark paper as it seemed like a good level to accumulate high returns,” a dealer at a private bank said. “The yield could go further up to 7.40% but not beyond as the market expects a pause after a 25-basis-point rate hike in February.”
Investors were also wary on stocking up on dated securities due to the higher-than-expected quantum of the state bond calendar announced for Jan-Mar, and let prices drift down, dealers said.
The Reserve Bank of India on Friday said state governments and Union territories were expected to borrow around 3.41 trln rupees in Jan-Mar through the auction of state development loans. The amount is higher than the 3.00-3.20 trln rupees the market had expected, dealers said.
Insurers and pension funds are likely to shift towards the higher-yielding asset if state bond issuances are in line with the calendar, reducing the appetite for gilts maturing in over 10 years, dealers said. This weighed on gilt prices during the day, dealers said.
However, some dealers said gilt prices may be unaffected by the state bond calendar if it undershoots the target like in previous years. In the first issuance for this quarter on Tuesday, seven states will raise 134.96 bln rupees through the sale of bonds, in line with the amount in the calendar.
While gilt prices recovered some losses, they ended lower after traders paid fixed rates in overnight indexed swaps due to the rise in US yields and Brent crude prices on Friday, dealers said. The US and other financial markets are closed today on account of New Year, with the domestic market factoring in the overseas cues early in the day.
The yield on the benchmark 10-year US Treasury note rose to 3.88% on Friday from 3.83% on Thursday. Benchmark US yields ended 2022 with their biggest annual rise in decades, pushed higher by aggressive rate hikes by the US Federal Reserve. A rise in US Treasury yields narrows the interest rate differential between the safe-haven asset and emerging market debt, making the latter less appealing to foreign investors.
Brent crude for March delivery rose nearly 3% on Friday to settle at $85.91 per barrel following news of China reopening its economy in the aftermath of COVID-19.
Traders were also cautious ahead of minutes of the US Federal Reserve Open Market Committee’s December meeting, scheduled for Thursday, dealers said. Traders expect Fed officials’ commentary to be focussed on further rate hikes in an effort to curb retail inflation.
According to data on the RBI’s Negotiated Dealing System – Order Matching platform, the turnover today was 188.15 bln rupees, compared with 280.30 bln rupees on Friday.
Meanwhile, trades aggregating 200 mln rupees were settled with the digital rupee pilot in four deals, compared with 350 mln rupees in seven deals on Wednesday.
OUTLOOK
On Tuesday, bond prices are seen steady as traders may stay on the sidelines ahead of the state loan auction, the first of the quarter, dealers said.
Seven states look to raise 134.96 bln rupees through the sale of bonds at auction on Tuesday.
Any significant movement in US Treasury yields and crude oil prices may lend cues at open.
The yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.30-7.38%.
India Gilts: Off lows after 10-year yield hits highest since Nov 10
MUMBAI/NEW DELHI–1350 IST–Government bond prices recovered some losses because investors stocked up on the 10-year benchmark 7.26%, 2032 bond as its yield rose to its highest level since Nov 10, dealers said.
Traders covered their short bets as the 10-year benchmark yield topped the key 7.35% mark, even as prices are expected to drift lower due to the larger-than-expected state bond supply in Jan-Mar, dealers said.
The Reserve Bank of India on Friday said state governments and Union territories were expected to borrow around 3.41 trln rupees in Jan-Mar through the auction of state development loans. The amount is higher than the 3.00-3.20 trln rupees that the market had expected, dealers said.
Some dealers did not trim their gilt holdings after the announcement, but were of the view that state bond cut-offs for the increased amount would dent the appetite for gilts from auction to auction. Seven states will raise 134.96 bln rupees through the sale of bonds on Tuesday.
“State loan quantum is not that affecting gilts market much today,” a dealer at a state-owned bank said. “However, we expect the yields to skyrocket tomorrow (Tuesday) at the auction, then we may see the real impact on gilts.”
The 10-year gilt was out of favour and fell the most among on-the-run gilts as the five-year overnight indexed swap rate increased on the back on a rise in US Treasury yields and crude oil prices, dealers said.
Moreover, traders paid fixed rates due to caution ahead of minutes of the Federal Open Market Committee’s meeting and economic forecast on Thursday, dealers said. The five-year swap rate rose by 4 basis points from Friday’s settlement to 6.49%.
According to data on the RBI’s Negotiated Dealing System, Order Matching platform, the market-wide turnover was 142.15 bln rupees at 1350 IST, compared with 180.85 bln rupees at 1330 IST on Friday.
Today, the yield on the 10-year benchmark 7.26%, 2032 bond is seen in the range of 7.31-7.37%. (Nishat Anjum and Aaryan Khanna)
India Gilts: Dn on rise in US ylds, crude, high Jan-Mar state borrow
MUMBAI–0940 IST–-Prices of government bonds fell tracking a rise in both US Treasury yields and crude oil prices, dealers said. Further, the higher-than-expected amount that states plan to borrow in Jan-Mar also weighed on gilt prices.
Both crude oil prices and yield on the benchmark 10-year US Treasury note rose on Friday as investors were concerned about the rate hike path by the US Federal Reserve considering recent commentaries by Fed officials about the need to tame inflation, dealers said.
The yield on the benchmark 10-year US Treasury note ended 5 basis points higher on Friday at 3.88%, while the Brent crude contract for March delivery ended at $85.91 per barrel, against the previous close of $83.46 per bbl.
Back home, the Reserve Bank of India on Friday said state governments and Union territories are expected to borrow around 3.41 trln rupees in Jan-Mar through the auction of state development loans. The amount is higher than the 3.00-3.20 trln rupees that the market expected, and also above the 2.53 trln rupees announced in the previous quarter.
The fall in prices was, however, limited as investors stepped up purchases near the lucrative 7.35% yield on the 10-year bond, dealers said.
“The key 7.35% yield on the 10-year benchmark bond may be difficult to break,” a dealer at a private bank said. “If the level breaks, then there will be some buying.”
Bonds may remain in a narrow range for the rest of the day as financial markets in Europe are closed today on account of New Year’s Day, dealers said.
According to data on the RBI’s Negotiated Dealing System, Order Matching platform, the market-wide turnover was 37.85 bln rupees at 0930 IST, compared with 68.70 bln rupees at 0930 IST on Friday.
Today, the yield on the 10-year benchmark 7.26%, 2032 bond is seen in the range of 7.31-7.37%. (Kasthuri Akhil)
India Gilts: Seen lower tracking the rise in US yields, crude prices
NEW DELHI – Prices of government bonds are seen opening lower in the first trading session of the new year due to a rise in US Treasury yields and crude oil prices, dealers said. The higher-than-expected amount that states plan to borrow in Jan-Mar may also weaken the appetite for dated securities.
Today, yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.30-7.37%, as against 7.33% on Friday.
The Reserve Bank of India on Friday said state governments and Union territories are expected to borrow around 3.41 trln rupees in Jan-Mar through the auction of state development loans, which is higher than the 2.53 trln rupees they had announced in the previous quarter.
The higher-than-expected amount for state development loans in the final quarter of the current financial year may widen the spread between gilt yields and state bond yields.
Globally, both US Treasury yields and crude oil prices rose on the last trading session due to concerns about the US Federal Reserve’s path of rate hikes in the new year, which may pull down domestic bond prices, dealers said.
The yield on the benchmark 10-year US Treasury note ended 5 basis points higher on Friday at 3.88%, while the Brent crude contract for March delivery ended at $85.91 per barrel, against the previous close of $83.46 per bbl.
A fall in domestic gilt prices may be limited as investors are expected to step up purchases near the 7.35% yield on the 10-year 2032 bond, a level considered lucrative, dealers said. (Shubham Rana)
End
US$1 = 82.74 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Avishek Dutta
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. 2023. All rights reserved.
Source: Cogencis
