More Stories

Informist, Monday, Oct. 28, 2024

By Cassandra Carvalho

MUMBAI – Prices of government bonds ended lower as the 10-year US Treasury yield touched 4.30% during Indian market trading hours, a level not seen since Jul. 11. The gilt market timing was extended till 1730 IST on Monday due to a technical glitch on the Reserve Bank of India's Negotiated Dealing System – Order Matching platform.

Due to a lack of domestic cues, traders "religiously" tracked the movement of US yields, with some covering short bets placed earlier as the benchmark US yield eased off from intraday highs. Investors await US data and events, including the US Federal Open Market Committee meeting and presidential election next week, to guide their trading strategy, dealers said. 

The 10-year benchmark 7.10%, 2034 bond closed at INR 101.60, or 6.87% yield Monday, against INR 101.72, or 6.85% yield on Friday. The new 10-year 6.79%, 2034 bond ended at INR 99.73, or 6.83% yield, against INR 99.89, or 6.80% yield on Friday. The benchmark yield ended at its highest level since Sept. 3.

"Some expect US yields to reach 4.50% (on the 10-year US yield), so obviously they won't buy anything now, they'll be on the sidelines, but those who have lost that expectation will make the most of these levels," a dealer at a private bank said. 

US yields rose on fears of Republican presidential candidate Donald Trump winning the US election next week and imposing inflationary fiscal policy. Despite the adverse cue, demand from domestic banks kept prices from falling further, with traders also covering short bets. State-owned banks likely picked up the 10-year gilt as its yield hit its highest in nearly two months, at 6.87%. 

Trading hours were extended by 30 minutes as a technical glitch on the Negotiated Dealing System-Order Matching platform at around 1650 IST left some traders unable to login to the platform even at the regular market close at 1700 IST. The error was resolved in fifteen minutes and trading closed at 1730 IST, dealers said.  More

Brent crude for December delivery fell to $71.61 a barrel at 1700 IST from $76.05 a barrel at the end of Indian market hours on Friday. On Saturday, Israel launched strikes at Iran that did not target oil production or nuclear sites. Iran said its air defences had successfully countered the latest attack, and did not signal further retribution, according to media reports. 

"Now that oil prices have corrected, the market should remain supported... This event (West Asia conflict) is over for the time-being," a trader at a primary dealership said.

Losses in gilts were limited by state-owned banks, who picked up the 7.10%, 2034 bond to add to their investment portfolios as they found the yield lucrative, dealers said. Private banks and primary dealers likely covered short bets placed last week. Some banks expected the benchmark yield to climb to as high as 6.92% if offshore cues worsen this week and US data disappoint, dealers said. 

Foreign portfolio investors may have slid back to becoming net sellers Monday, after buying a marginal amount of bonds under the fully accessible route Friday. The scope of their bond sales was not large and did not unduly move the market as crude prices fell, dealers said. Globally and in India, investors are cautious ahead of data on US jobs and economic activity till Friday, followed by the US election result and the Federal Open Market Committee outcome next week.

According to the RBI's Negotiated Dealing System-Order Matching platform, the market turnover was INR 399.85 billion, against INR 404.85 billion Friday. Four trades worth INR 200 million were settled using the wholesale digital rupee pilot, the same as Friday.

OUTLOOK

On Tuesday, government bond prices may take cues from the movement in US Treasury yields and crude oil prices, dealers said. Further geopolitical developments in West Asia will also be keenly tracked.

Trade volumes may be muted through the week, with Diwali scheduled on Nov. 1, as some traders are on leave during the festival season. At the state bond auction Tuesday, 10 states will raise INR 250.50 billion, lower than the indicated INR 333.45 billion in the calendar for Oct-Dec, but more than triple last week's figure. The higher borrowing, along with negative sentiment in the market, may cause higher cut-off yields on the bonds, dealers said. 

"I think (at this auction) the spread between state bonds and gilts will widen, by at least 1-2 basis points. Last week, it was a 29 bps spread (between the 10-year benchmark and state bond), it may increase now," a dealer at a state-owned bank said.

Traders await US data such as the advance Jul-Sept GDP growth numbers, the October employment report and purchasing managers' indices for cues on the FOMC's decision on interest rate next week. Until the US Presidential election on Nov. 5, traders are not expected to pick up gilts in sizeable quantum, and will look at any indication of the election result for cues, dealers said.

The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.84-6.90%, while that on the 6.79%, 2034 bond is seen at 6.80-6.86% on Tuesday.

India Gilts: Off lows; traders pick up 10-yr gilt as yield near 2-mo high

MUMBAI--1608 IST--Prices of government bonds were off lows as traders picked up the 7.10%, 2034 gilt as its yield rose to its highest level in nearly two months. A slight intraday fall in the 10-year US Treasury yields also helped bring traders to the buying side, dealers said.

"The (yield) level on the 10-year is very lucrative right now, so domestic traders are both value buying and short covering," a dealer at a primary dealership said. At the day's high, the 10-year benchmark yield hit its highest since Sept. 3.

Domestic investors picked up the 7.10%, 2034 bond to add to their investment portfolios as they found the yield lucrative, dealers said. Private banks and primary dealers likely covered short bets placed last week. The fall in crude oil prices also gave positive cues for buyers of India's gilt as fears of an escalation in the Israel-Iran conflict subsided, dealers said.

With this, selling pressure from foreign investors also eased a little. Dealers said foreign portfolio investors may be buyers at the lucrative price levels, and after selling gilts last week. They were earlier sellers due to an overnight rise in the 10-year US Treasury yield to 4.29%, an over-three-month high. The benchmark yield had eased to 4.26% at 1600 IST.

Volumes in the market also ticked up in the early trading hours as stop-losses were triggered after the 7.10%, 2035 bond opened above the 6.85% yield level. Traders expect volumes to remain "dry" for the rest of the week given the holiday on Friday for Diwali, dealers said.  

According to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform, the market-wide turnover was INR 356.35 billion, against INR 330.55 billion at 1630 IST Friday. During the day, the yield on the most traded 7.10%, 2034 bond is seen at 6.84-6.90%, and that on the 6.79%, 2034 bond is seen at 6.78-6.85%.  (Srijita Bose)

India Gilts: Fall further as US ylds rise, domestic bks' buys not aggressive

MUMBAI--1224 IST--Prices of government bonds were sharply down as the 10-year US Treasury yield rose to 4.30%, a level last seen on Jul. 11.

Traders were cautious in placing any bets ahead of the US economic data due this week and key events lined up next week, dealers said.

"The 6.85% level (of the benchmark 10-year 7.10%, 2034 bond) was the support earlier, now it is the resistance. Traders are cautious in placing any aggressive bets now," a dealer at a state-owned bank said. 
 

In recent weeks, state-owned banks picked up bonds when the yield of the 10-year rose to 6.85%, anticipating yields would not rise further. However, in the face of continuous sales by foreign portfolio investors, they were keen to secure higher yields, and bought in only thin volumes early Monday, dealers said. In addition, traders wanted to avoid adding further to their portfolios ahead of US economic data due this week. Investors may not add the 7.10%, 2034 bond to their portfolios until its yield reaches 6.88%, and ultimately at 6.92%, which is not likely to break until next week without further negative cues, dealers said.

"Volumes were high in the morning because at 6.85%, stop losses were triggered, otherwise now Diwali holiday and all this caution will keep volumes muted," a dealer at another state-owned bank said. Money markets are shut on Friday for Diwali.

The US data this week, such as the October unemployment report, September job openings and labor turnover survey and the manufacturing purchasing managers' index will determine traders' views on the outcome of next week's Federal Open Market Committee meeting, dealers said. Offshore cues were in focus due to their importance, and also the lack of domestic triggers, they said.

Short sellers held on to the bets on bonds, and initiated fresh short bets, heading into the data. Foreign banks and portfolio investors are likely to continue selling gilts until after the outcome of the US election on Nov. 5 and the FOMC meeting on Nov. 6-7.

According to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform, the market-wide turnover was INR 131.35 billion, against INR 63.70 billion at 1130 IST on Friday. During the day, the yield on the most traded 7.10%, 2034 bond is seen at 6.84-6.90%, and that on the 6.79%, 2034 bond is seen at 6.78-6.85%.  (Cassandra Carvalho)

India Gilts: Down as US 10-year yld jumps to over 3-mo high

MUMBAI--1015 IST--Government bond prices were down after the yield on the 10-year US Treasury note rose to more than a three-month-high, dealers said. The losses were, however, limited due to a fall in crude oil prices after fears of a regional war in West Asia subsided, they said.

Dealers said that tensions in West Asia did not seem to escalate after Saturday's strike by Israel on Iran, which was somewhat positive for traders. Brent crude for December delivery fell to $72.51 a barrel from $74.88 per barrel at the end of Indian market hours on Friday. Traders will, however, track movement in US yields and be more cautious ahead of data on US GDP and personal consumption expenditure during the week, they said. Uncertainty about the outcome of US elections next week is also likely to keep traders on edge. 

"I think the market is a little underpriced right now, but the caution going into a data-heavy week and on US elections will keep the market down," a dealer at a private bank said.

With global factors in focus, volumes picked up in early trade but may fall off later in the day. Investors are likely to remain on the sidelines in the holiday-shortened week, with money markets shut on Friday for Diwali, traders said.

According to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform, the market-wide turnover was INR 74.10 billion, against INR 25.95 billion at 1030 IST on Friday. During the day, the yield on the most traded 7.10%, 2034 bond is seen at 6.84-6.90%, and that on the 6.79%, 2034 bond is seen at 6.78-6.85%.  (Srijita Bose)

India Gilts: Seen down as 10-year US yield jumps to over 3-mo high

MUMBAI – Prices of government bonds are seen opening lower after the yield on the 10-year US Treasury note rose to an over three-month high, dealers said. Traders may avoid picking up gilts due to a flare-up in tensions in West Asia.

The yield on the most-traded 7.10%, 2034 bond is seen at 6.84-6.90% Tuesday, against 6.85% Friday. Meanwhile, the yield on the 6.79%, 2034 bond is seen at 6.78-6.85% Tuesday, against 6.78% the previous day. 

The 10-year US Treasury yield rose to 4.28%, from 4.20% at the end of Indian market hours Friday. Republican candidate Donald Trump's odds of winning have led to fears of higher government spending, pushing up 10-year US yield further.

On Saturday, Israel launched strikes at Iran that did not target oil production or nuclear sites. This comes a month after Iran had bombed Israel in retaliation for previous attacks. Iran said its air defences had successfully countered the latest attack, and did not signal further retribution, according to media reports. Foreign portfolio investors may continue to trim their holdings of risk assets such as India's bonds. Last week, FPIs sold INR 31.84 billion worth of gilts under the fully accessible route.

Domestically, traders do not have much to look forward to in terms of data or market activity. Investors are likely to stay on the sidelines ahead of the holiday-shortened week. India's money markets will be shut on Friday for Diwali. This may lend volatility to gilt prices if offshore triggers persist, dealers said.  (Srijita Bose)

End

US$1 = INR 84.08

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

Edited by Saji George Titus

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 feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.