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Informist, Tuesday, Sep 24, 2024

By Cassandra Carvalho

MUMBAI – Government bonds ended the day on a slightly positive note as some traders rushed to cover their short bets, a few minutes before the closing bell. At around 1200 IST, traders sold their stock at a profit following a rise in US yields, which capped early gains in prices when foreign investors picked up bonds, dealers said.

The 10-year benchmark 7.10%, 2034 gilt ended at 102.36 rupees, or 6.76% today, against 102.30 rupees or 6.77% yield on Monday.

"After selling bonds when US yields rose, traders were expecting gilt prices to fall further before they purchased bonds to compensate, that didn't happen, so irrespective of US yields they bought bonds before the market closed," a trader at a primary dealership said.

The yield on the 10-year US Treasury note rose to 3.79% today, against 3.76% at 1700 IST on Tuesday. Indian gilts trimmed early gains tracking the rise in US yields, but recovered some ground towards the fag-end of the day. 

In the first half of the day, the 10-year benchmark paper rose by 9 paise to the day's high of 102.41 rupees, as foreign portfolio investors amped up purchases through foreign banks, dealers said. Traders expect inflows from foreign investors to continue throughout the week, and attribute it to expectations of a shift in stance by the Monetary Policy Committee at its meeting next month, coupled with the weightage expansion of Indian gilts to 4% in the JP Morgan emerging market bond index. 

State-owned banks were also likely buyers earlier in the day, as yield on the benchmark gilt moved between 6.77% and 6.79%, which was considered a good bargain, dealers said. 

However, bonds were mostly confined to a narrow trading range in the absence of strong cues. Traders awaited the results of today's state bond auction, wherein 12 states raised 344 bln rupees. The auction was fully-subscribed and along expected lines, but cutoff yields on the short-term bonds were lower than Informist's poll estimates. Longer-tenure papers had higher-than-view yield cutoffs, and dealers once again pointed out the growing expectations of the Monetary Policy Committee softening its stance in October.

"...This shows that the market is gearing up for near-term expectations, the market expects MPC to change its stance from 'withdrawal of accomodation' to 'neutral'," a dealer at a state-owned bank said. 

Domestic banks picked up short-term bonds at the auction ahead of the Reserve Bank of India's liquidity coverage guidelines set to be implemented by early 2025-26 (Apr-Mar), while mutual funds picked up short-tenure papers to deploy their collections, dealers said. 

Today's state bond auction showed strong investor appetite as the market comfortably absorbed a large supply of state government bonds worth a higher-than-indicated amount of 344 bln rupees, dealers said. In the quarterly calendar for states, the Reserve Bank of India had indicated a borrowing amount of 269.56 bln rupees for today's auction.  

"Since the yield on the benchmark 10-year gilt has remained below 6.80%, the market is reflecting traders' positive sentiments...the US Federal Reserve has cut rates by a huge 50 basis points, now the market is expecting at least a change in stance by MPC," a dealer at a private bank said. "The demand for Indian bonds is high compared to the supply...all these factors reflect in the gilt prices you see."

Traders avoided big bets ahead of crucial events this week. The government's borrowing calendar for Oct-Mar, the Treasury bill issuance calendar for Oct-Dec and state bond calendar for Oct-Dec are all expected to be released by the end of this week.

According to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform, the market-wide turnover was 546.60 bln rupees, against 507.00 bln rupees at 1700 IST on Monday. No trades were settled under the wholesale digital rupee pilot today, the same as on Monday.

OUTLOOK

On Wednesday, gilts will take cues from the overnight movement of US Treasury yields, dealers said. A sharp swing in prices is unlikely as traders await the borrowing calendars for government borrowing due later this week.

On the data front, traders await US non-farm payrolls data due on Thursday for cues on movement in US yields, dealers said.

The movement in crude oil prices may also affect gilt prices. Any uptick in yields may also prompt purchases by domestic banks, which are gearing up to meet a regulatory requirement to maintain larger buffers of liquid assets, such as government securities from the next financial year starting Apr 1. The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.74-6.80%. 

India Gilts: Up on FPI buys; strong demand seen at state loan auction

MUMBAI–-1240 IST--Prices of government bonds were up after foreign portfolio investors picked up bonds via foreign banks. The sudden inflows caused market participants to buy bonds despite trimming portfolios ahead of the higher-than-indicated state bond auction, dealers said.

Traders were expecting staggered inflows of foreign funding to push prices of gilts higher this week, nearing the end of the month. The readjustment of JP Morgan's emerging market bond index to expand the weight of Indian gilts to 4% by the end of September is spurring the inflows, dealers said. 

"The moment the yield of the benchmark (10-year 7.10%, 2034 bond) touches 6.77% or 6.78%, it's a good level to buy, so even a slight trigger (such as foreign inflows) will cause gilt prices to jump, but otherwise the market is steady," a trader at a primary dealership said.

Earlier in the day, gilt prices opened steady and moved a tad down as traders likely trimmed their holdings ahead of the 344-bln-rupee state bond auction scheduled today. In the quarterly calendar for states, the Reserve Bank of India had indicated a borrowing amount of 269.56 bln rupees for today's auction.  

Banks are expected to lap up the short-term state bonds, especially Karnataka's four-year bond and Tamil Nadu's 7.03%, 2029 reissue bond, while longer-tenure papers are expected to be picked up by pension funds and life insurers.

Receiving in overnight swap rates by domestic traders also aided gilt prices, dealers said. Gilt prices are expected to remain within a thin band throughout the day, dealers said.

According to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform, the market-wide turnover was 257.00 bln rupees, against 226.55 bln rupees at 1230 IST on Monday. (Cassandra Carvalho)  

India Gilts: Steady on lack of firm cues; mkt eyes state bond auction

MUMBAI--1000 IST--Prices of government bonds were little changed due to a lack of significant domestic and global cues, dealers said. The absence of major cues led the market to turn their attention towards the state government securities auction result, they said. 

Traders await the state bond auction to gauge investor appetite for the larger-than-expected supply of state government securities this week, dealers said. At what will be the last state bond auction for Jul-Sep, 12 states plan to raise 344 bln rupees, higher than the 269.56-bln-rupee amount stated in their indicative calendar. 

"There are no triggers for us to track right now, US yields are also steady," a dealer at a state-owned bank said. "Yes, the amount for state bonds is higher than the indicative calendar, but there was no reaction to it because the main focus of everyone is on the upcoming calendar."

Bonds are likely to trade on a cautious note ahead of the government's borrowing calendar for Oct-Mar, expected to be released this week. While some sections of the market see a likelihood of the government cutting its gross borrowing target of 14.01 trln rupees for 2024-25 (Apr-Mar), traders also await the tenor-wise distribution of bond supply for the next six months, dealers said. 

According to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform, the market-wide turnover was 45.25 bln rupees, against 29.60 bln rupees at 0930 IST on Monday. (Siddhi Chauhan)

India Gilts:Seen lower on higher-than-indicated supply of state bonds

MUMBAI – Prices of government bonds are seen opening a tad lower due to a higher-than-indicated amount of state government securities' auction scheduled to take place at 1030-1130 IST today, dealers said. 

The yield on the 10-year benchmark 7.10%, 2034 gilt is seen at 6.74-6.80% today, against 6.77% on Monday. Inflows from foreign investors may continue because of the inclusion of Indian bonds in JP Morgan's emerging market bond index, a 10-month process that began on Jun 28.

The Reserve Bank of India on Friday said 12 states would raise 344 bln rupees through the sale of bonds on Tuesday. The amount is higher than what states were expected to raise this week. As per the indicative calendar for state borrowing for Jul-Sep, states were supposed to borrow 269.56 bln rupees on Tuesday.

The demand at today's state bond auction is seen firm as the returns on state-government securities are better than the government bonds, dealers said. The demand at the state bond auction will also see a boost as this is the last state bond auction for Jul-Sep, dealers said. 

At the auction, the demand is mostly seen concentrated on bonds with tenures maturing after 10 years as they will fetch higher returns compared with those maturing in the shorter-tenure, dealers said. Out of the 344 bln rupees, 266.5 bln rupees will be raised by states maturing above 10 years. 

On the global front, traders will eye any significant movement in US Treasury yields during the day, dealers said. At 0820 IST, the yield on the 10-year benchmark US Treasury note was little changed from 3.76% at the time the Indian market closed on Monday. (Siddhi Chauhan)

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Aditya Sakorkar

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