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Informist, Thursday, Oct. 31, 2024

By Cassandra Carvalho

MUMBAI – Prices of government bonds ended down Thursday as US Treasury yields rose after mixed US economic data. A "risky" week ahead, comprising of key US economic data, the US presidential election outcome, and the Federal Open Market Committee's decision on interest rates, deterred traders from placing bets on gilts aggressively, dealers said.

Volumes were tepid, with Diwali being celebrated in several parts of the country Thursday, ahead of a market holiday Friday. The market-wide turnover on the Negotiated Dealing System – Order Matching was INR 204.90 billion, the lowest since Dec. 26.

The 10-year benchmark 7.10%, 2034 bond closed at INR 101.73, or 6.85% yield, against INR 101.87, or 6.83% yield on Wednesday. The new 10-year 6.79%, 2034 bond ended at INR 99.84, or 6.81% yield, against INR 99.96, or 6.80% yield on Wednesday.

At 1700 IST, the 10-year US Treasury note was at 4.29%, up from 4.23% at the end of Indian market hours Wednesday, as Jul-Sept GDP data and labour market failed to lend significant cues on the US interest rate view. Gilt prices opened lower, then recovered slightly, matching an intraday fall in US yields. Bond prices closed at the day's lows as the benchmark US yield rose again, and because traders sold bonds before the long weekend, with a multitude of US data this week and events lined up next week.

"Everyone is sticking to intraday trades, nothing much, intraday churning is there, but in nominal amounts, the volumes are dry," a trader at a primary dealership said.

Traders also refrained from making significant adjustments to their portfolios before the US personal consumption expenditure data post market hours and non-farm payrolls data on Friday. Since volumes were expected to slump on Thursday, dealers said most of the readjustment had happened earlier in the week. The two data points will provide guiding cues on the Federal Open Market Committee's decision on interest rate cuts at its meeting from Nov. 6-7.

Market participants are likely to step up purchases to replace bonds that are maturing, once the uncertainty on US election, fought closely between Democrat candidate Kamala Harris and Republican candidate Donald Trump, is over on Tuesday, dealers said.

"The market is not heavy...everyone is mostly squaring off before next week. It is too risky to have excess or less before the (inflation and jobs) data and the (US Presidential) elections," a dealer at a private bank said.

Positive demand-supply conditions in India kept a further fall in bond prices limited, dealers said. Traders said there was plenty of appetite for bonds, especially with INR 1.54-trillion worth of gilts maturing in November. The maturities will begin with the 6.18%, 2024 bond's redemption, worth INR 774.13 billion, on Monday.

Nominal amounts of foreign inflows also limited the fall in bond prices during the day, dealers said. Being the last day of the month, traders said there were some foreign inflows as the weight of India's fully accessible route bonds on J.P. Morgan's Government Bond Index – Emerging Markets rose to 5% on Thursday.

According to the Reserve Bank of India's Negotiated Dealing System-Order Matching platform, the market turnover was the lowest in 10 months, against INR 327.25 billion Wednesday. No trades were settled using the wholesale digital rupee pilot Thursday, same as on Wednesday.

OUTLOOK

Money markets are shut on Friday for Diwali, and gilts are not traded on Saturday. On Monday, prices of government bonds may take cues from the movement in US Treasury yields after several key data points are released over the long weekend for domestic traders, dealers said.

US personal consumption expenditure in September rose 0.2% on month and 2.1% on year. The US Federal Reserve's preferred inflation gauge was in line with Dow Jones' estimates. Meanwhile, US initial unemployment claims for the week ended Saturday were lower than expected.

The US October employment report on Friday will be the next trigger to be watched for direction on US interest rates ahead of Federal Open Market Committee's decision on Nov. 7.

The 7.10%, 2034 bond's yield may top 6.85% if incoming US data make the case for a slower pace of rate cuts, after climbing past that level earlier this week, dealers said. Until the US presidential election on Tuesday, traders are not expected to pick up gilts in sizeable quantities, and will look at any indication of the election result for cues, dealers said.

Geopolitical developments in West Asia will also be watched. The yield on the 10-year benchmark 7.10%, 2034 bond is seen at 6.78-6.90%, while that on the 6.79%, 2034 bond is seen at 6.79-6.84% on Monday.

India Gilts: Remain tad dn on rise in US yields, likely FPI buys cap losses

MUMBAI--1530 IST--Prices of government bonds remained lower due to an overnight rise in US Treasury yields. Inflows at the month-end from index-tracking foreign portfolio investors are likely to have weakened the impact of the offshore trigger, dealers said. Trade volumes were on track to be the lowest since the New Year.

Some dealers said they awaited stronger cues from the US, with key inflation and jobs data still on the calendar, as well as the US election on Tuesday and the US Federal Open Market Committee's meeting next week. Most traders kept to the sidelines amid thin market liquidity, with several gilt dealers on leave for Diwali. The festival is being celebrated across much of the country Thursday, even though money markets are shut only on Friday. Dealers said traders were likely to keep their portfolios light going into the long weekend and with multiple events lined up next week.

"We have seen that our market has not been as volatile as the US market because most traders have either already priced in the data or are waiting for stronger cues to take a view, but right now there is caution as (US) election is there next week and then there is FOMC meeting," a dealer at a primary dealership said. Even at its worst, India's 10-year gilt yield rose by less than 2 basis points Thursday despite the 6 bps movement in the comparable US note.

Positive demand-supply conditions in India have kept any fall in prices limited. However, the 7.10%, 2034 bond's yield may top 6.85% if incoming US data make the case for a slower pace of rate cuts, dealers said. Personal consumption expenditure post market hours and non-farm payrolls data on Friday are key data points ahead of the FOMC's rate decision. 

According to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform, the market-wide turnover was INR 182.35 billion, against INR 231.10 billion at 1530 IST on Wednesday. During the day, the yield on the most traded 7.10%, 2034 bond is seen at 6.80-6.88%, and that on the 6.79%, 2034 bond is seen at 6.77-6.85%.  (Srijita Bose)

India Gilts: Tad down as US yields up; volume low ahead of US data, weekend

MUMBAI--1211 IST--Prices of government bonds were a tad down as US Treasury yields rose overnight, dealers said. The 10-year US Treasury note was at 4.28%, up from 4.23% at the end of Indian market hours Wednesday, but easing slightly from Thursday's 4.30% high. 

After positive jobs data on Tuesday, and mixed economic data on Wednesday, traders were cautious about placing any major bets ahead of another set of data points from the US after market hours on Thursday and Friday. The US presidential election on Nov. 5 also weighed on trading decisions as the winning candidate's economic policies were awaited. The risk of placing aggressive bets also worsened as traders await the outcome of the Federal Open Market Committee on Nov. 7.  

"I don't think anyone will venture into any new position now. Today (Thursday), there's PCE (US personal consumption expenditure data), tomorrow (Friday) there's NFP (non-farm payrolls, so it'll be range-bound only," a dealer at a state-owned bank said.

Some traders were on leave ahead of the long weekend, also keeping volumes low. Diwali is being celebrated across some communities on Thursday, while money markets are shut for the occasion on Friday. The market-wide turnover was INR 79.95 billion, against INR 98.05 billion at 1130 IST on Wednesday, according to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform. 

Foreign inflows likely kept gilt prices supported, as passive investment in gilts led to inflows due to the increase in the weightage of Indian gilts to 5% in the J.P. Morgan emerging market bond index Thursday, dealers said. This was somewhat offset by the impact of foreign and private banks shorting gilts on their proprietary portfolios. 
 

During the day, the yield on the most traded 7.10%, 2034 bond is seen at 6.80-6.88%, and that on the 6.79%, 2034 bond is seen at 6.77-6.85%.(Cassandra Carvalho)

India Gilts: Down on rise in US yields; losses limited on likely FPI inflows

MUMBAI--1015 IST--Government bond prices fell due to an overnight rise in US Treasury yields, dealers said. The losses were, however, limited as index-tracking foreign investors were likely to have picked up gilts at the month-end, as J.P. Morgan's emerging market bond index was rebalanced.

Foreign banks turned buyers in the past two days after selling in the secondary market since the middle of the month. Foreign portfolio investors were likely buying gilts as India's weightage in the J.P. Morgan emerging market bond index increased to 5% Thursday, dealers said. State-owned banks likely turned sellers after picking up gilts at a cheaper level last week, dealers said. Traders were likely to have placed intraday bets only to unwind them by the end of the day, they said. 

"Today (Thursday), we could see some periods of volatility in the market as FPIs could come in due to index inclusion, plus I think most traders had mostly priced in the US GDP data pretty much, so market here should mostly move in a narrow range," a dealer at a private bank said. 

The yield on the 10-year US Treasury note rose 6 basis points overnight to 4.29%, despite mixed economic data. The advance estimate for US Jul-Sept GDP growth was below consensus, but private payrolls expanded more than expected in October, according to ADP data released Wednesday. Trade volumes were tepid owing to lower headcount in trading rooms as Diwali is being celebrated in many parts of India on Thursday. Money markets will be shut on Friday on account of the festival.

According to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform, the market-wide turnover was INR 43.95 billion, against INR 68.40 billion at 1030 IST on Wednesday. During the day, the yield on the most traded 7.10%, 2034 bond is seen at 6.80-6.88%, and that on the 6.79%, 2034 bond is seen at 6.77-6.85%.  (Cassandra Carvalho)

India Gilts: Seen opening lower on rise in US ylds; holiday to limit volumes

MUMBAI – Government bond prices may open lower due to an overnight rise in US 10-year Treasury yield, dealers said. Traders may refrain from placing large bets ahead of the long weekend and crucial events in the US till next week.

The yield on the most-traded 7.10%, 2034 bond is seen at 6.80-6.88% Thursday, against 6.83% Wednesday. Meanwhile, the yield on the 6.79%, 2034 bond is seen at 6.78-6.85%, against 6.80% the previous day.

Yield on the 10-year benchmark US Treasury note jumped to 4.29% from 4.23% at the close of Indian markets Wednesday. US data released after market hours presented mixed cues on the pace of US rate cuts. ADP private sector jobs report for October showed that jobs grew by 233,000, over double the estimate. The advance GDP, showed that US economy expanded at 2.8% on year, in Jul-Sept, and below the consensus 3.1% view compiled by Dow Jones. 

Traders may avoid aggressive bets ahead of the long weekend. Indian money markets are shut on Friday for Diwali. By the time Indian traders get back to their screens Monday, US inflation and non-farm payrolls data could lead to a significant movement in US yields, dealers said.

Even though money markets are shut only on Friday, trade volumes may be thin Thursday as some traders are on leave. The festival is being celebrated on Thursday in many parts of the country. On other hand, foreign portfolio investors may be active as India's weightage in the J.P. Morgan emerging market bond index is due to increase to 5% Thursday, dealers said. (Srijita Bose)

End

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

Edited by Ashish Shirke

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