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Informist, Monday, Nov. 25, 2024

By Cassandra Carvalho 

MUMBAI – Prices of government bonds closed higher, tracking softening in US Treasury yields over the weekend. The Bharatiya Janata Party-led Mahayuti alliance's win in the Maharashtra Assembly elections also aided gilt prices, dealers said. Gains were capped as traders sold bonds for profit, especially the 6.79%, 2034 bond, after picking up the gilt at Friday's auction, dealers said. 

The 10-year 6.79%, 2034 bond ended at INR 99.76, or 6.82% yield, against INR 99.59, or 6.85% yield, Friday. The paper topped the total trade volume over the 7.10%, 2034 for the first time, as traders began transitioning to this paper as the new 10-year benchmark gilt. The 7.10%, 2034 bond closed at INR 101.68, or 6.85% yield, Monday, against INR 101.55, or 6.87% yield, Friday. 

The yield on the 10-year US Treasury note reached a low of 4.33% during trading hours, against 4.39% at Friday's Indian market close. US President-elect Donald Trump chose Scott Bessent, who is considered tough on inflation and market-friendly, as his would-be administration's Treasury secretary.

The result of the Maharashtra Assembly election was also a positive cue for the market due to policy continuity and the alignment of central and state governments. The Mahayuti alliance won 235 seats, according to vote counts over the weekend. Dealers said the new government may increase its bond issuances, but was going to be more fiscally prudent than the alternative.

"Market has taken the election news positively, because of a stable government. The (Maharashtra government's) spending might be more, but US yields have also fallen, so for today (Monday) it's good for the market," a dealer at a private bank said.

Long-term bonds rose the most on the election result. Maharashtra is the largest bond issuer among states by far, and has raised INR 670 billion through bonds so far in the fiscal year started April, of which only INR 45 billion was in bonds maturing under 10 years.

The 6.79%, 2034 bond gained more than bonds of similar maturities as traders sold the benchmark 7.10%, 2034 bond to pick up the newer gilt. However, gains were capped as traders, especially state-owned banks, sold the 6.79%, 2034 gilt at a profit after picking up stock at Friday's auction. The Reserve Bank of India set a cut-off price of INR 99.48 on the gilt at the auction. Selling the bond around its day's high of INR 99.81 assured a tidy profit for traders, dealers said. 

Foreign banks likely picked up bonds in light volumes, dealers said. Traders have continuously revised down their bets on India's GDP growth for Jul-Sept, dealers said. Reserve Bank of India staff last week estimated September quarter GDP growth at 6.8%, against the official 7% forecast. Traders estimate a reading as low as 6.4%. A reading like that would boost hope of a sharper rate-cut cycle by the RBI's Monetary Policy Committee. The MPC will have its next meeting from Dec. 4-6, but traders expect a rate cut only in February. 

"One week ago the market was estimating the (GDP growth) print to be 6.7%, now it's gone down to 6.4-6.5%," a trader at a primary dealership said.

Traders were already realigning portfolios for this week's auction, and some traders said they expected a new 40-year bond. After market hours, a government said in a press release that it will sell INR 100 billion of the 7.02%, 2031 gilt, INR 50 billion of a new 10-year green bond, and INR 150 billion of the 7.34%, 2064 gilt.

Dealers said RBI will likely ask state-owned banks and insurers to purchase the green bond at the auction to see it go through. In June, the central bank rejected all 99 competitive bids for the bond, the first time it has resorted to such a measure since Sep 23, 2022.

According to the RBI's Negotiated Dealing System-Order Matching platform, the market turnover was INR 329.95 billion, against INR 420.25 billion Friday. No trades were settled using the wholesale digital rupee pilot Monday, whereas two trades worth INR 100 million were settled using this method Friday.

OUTLOOK

Tuesday, the movement in US yields may lend cues to gilt prices at the open, dealers said. Some dealers said that expectations of lower domestic Jul-Sept GDP growth may cause prices to open higher.

The Jul-Sept GDP print, due at 1600 IST Friday, has been in focus as the next domestic trigger to gauge India's pace and quantum of India's interest rate cuts. US personal consumption expenditure data for October and the minutes of the Federal Open Market Committee's November meeting, past midnight Wednesday, are awaited later this week for a view on US interest rates. Developments in the Russia-Ukraine conflict are also closely watched.

The yield on the 6.79%, 2034 bond is seen at 6.79-6.85% on Tuesday. The yield on the 7.10%, 2034 bond is seen at 6.82-6.88%.

India Gilts: Remain up; gains capped as traders book profit on auction stock

MUMBAI--1620 IST--Prices of government bonds remained up after a fall in US yields and the Maharashtra Assembly election results, dealers said. Gains were capped as traders, who picked up the 6.79%, 2034 gilt at Friday's auction, sold the bond at a profit in the secondary market, they said.

Traders had picked up the 10-year gilt at auction on Friday, as bids for the fresh supply of INR 220 billion were poor. While market sentiment remained negative in the long-term, positive news over the weekend saw bond prices recover from Friday's auction result blow, dealers said. The Reserve Bank of India set a cut-off price of INR 99.48 for the 6.79%, 2034 bond. 

"On Friday it was 6.89% (on 7.10%, 2034 gilt), but now it is 6.85% so that 4 basis point advantage we're getting. Prices don't have any chance of rising because everyone is booking profit," a dealer at a state-owned bank said.

As for the Maharashtra assembly election result, some dealers felt the policy continuity was positive. However, the state's bond spreads would likely increase as the populist schemes listed in the Bharatiya Janata Party-led Mahayuti coalition would increase the state's borrowing or fiscal deficit, they said.

Meanwhile, traders placed short bets on the 7.34%, 2064 paper ahead of fresh supply in that tenure this week, leading to an uptick in trade volumes. As per the Oct-Mar borrowing calendar, the government will sell INR 150 billion of a 40-year paper, INR 50 billion of a 10-year green bond and INR 100 billion of the seven-year gilt on Friday. 

The auction announcement is awaited post-market hours, as dealers expect the trend of new bond issuances to continue in the case of the 40-year paper. The long-term gilt's outstanding amount is currently INR 1.64 trillion. In the past two auctions, the government issued new gilts for the 15-year and 5-year tenures, when their outstanding amounts were less than INR 1.20 trillion. 

According to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform, the market-wide turnover was INR 285.90 billion, against INR 361.70 billion at 1630 IST on Friday. During the day, the yield on the 6.79%, 2034 bond is seen at 6.81-6.88, and on the 7.10%, 2034 bond is seen at 6.83-6.90%. (Cassandra Carvalho)

India Gilts:Remain sharply up; Maharashtra poll results, fall in US ylds aid

MUMBAI--1400 IST--Prices of government bonds remained sharply up as the Maharashtra election results suggested policy continuity in India's largest state in terms of output, dealers said. Traders also covered some short bets as the 10-year US Treasury yield eased to 4.34%, down 5 basis points from its level at 1700 IST Friday.

With the Bharatiya Janata Party-led Mahayuti alliance comfortably winning the Maharashtra Assembly elections, traders said the state borrowing may rise but remain in check as compared with the alternative Maha Vikas Agadi alliance. This made them favour longer tenure bonds, dealers said. Maharashtra is the largest bond issuer among states by far, and has raised INR 670 billion through bonds so far in the fiscal year started April, of which only INR 45 billion was in bonds maturing under 10 years.

"The fall in US yields was just one of the factors, but we don't generally track them so strongly. Overall, the market is just returning to last Tuesday's (yield levels) after the (gilt) auction is done and also on Maharashtra election results," a dealer at a state-owned bank said.

The trade volume in the 6.79%, 2034 bond topped the 7.10%, 2034 bond in the secondary market. Traders were increasingly considering the former as the 10-year benchmark paper, and the 6.79%, 2034 bond rose slightly more than gilts of similar maturity as banks sought to get their hands on the paper, dealers said. Primary dealers were slightly trimming stock picked up at the auction on Friday, when the government issued INR 220 billion. 

Traders said the only hurdle for it to be considered the market benchmark outright was the lack of short selling possible on the gilt due to its limited outstanding, dealers said. The Fixed Income Money Market and Derivatives Association of India notified it as a liquid security even in November, so with the increase in the outstanding, short sales in the 7.10%, 2034 bond may get switched to the 6.79%, 2034 bond over the next few weeks, dealers said.

Despite the large movement in prices, trade volumes were not robust overall. Dealers said this was due to growth data to be released for both India and the US this week, as well as the Personal Consumption Expenditures Price Index, the US Federal Reserve's preferred inflation print, scheduled Wednesday.

According to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform, the market-wide turnover was INR 227.90 billion, against INR 243.75 billion at 1430 IST Friday. During the day, the yield on the 6.79%, 2034 bond is seen at 6.81-6.88, and on the 7.10%, 2034 bond is seen at 6.83-6.90%. (Srijita Bose and Aaryan Khanna)

India Gilts: Up as US ylds dn; BJP-led Mahayuti's Maharashtra poll win aids

MUMBAI--1007 IST--Prices of government bonds rose sharply due to a fall in US Treasury yields. The Bharatiya Janata Party-led Mahayuti won the Maharashtra elections, which also aided gilt prices, dealers said. 

"There are a couple of reasons for the market being up today (Monday). The first reason is that US yields have fallen by around 4 bps (basis points)," a dealer at a primary dealership said. "The BJP-led Mahayuti securing a clear majority has also favoured prices as they (BJP) won't have to rely on populist schemes to appease people." 

Mahayuti registered a win in the Maharashtra Assembly elections, securing 235 seats and 49.6% of the vote share, leaving the Opposition Maha Vikas Aghadi behind at 49 seats and 35.3% of the votes. The BJP led the charge for Mahayuti by winning 132 of the 149 seats it contested and secured a 26.8% vote share.

On the global front, a fall in US yields also aided gilt prices, dealers said. The yield on the 10-year benchmark US Treasury note fell to 4.35% from 4.39% at the close of Indian market hours Friday. Investors welcomed US President-elect Donald Trump's pick for Secretary of Treasury, Scott Bessant.

According to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform, the market-wide turnover was INR 66.80 billion at 1030 IST, against INR 86.40 billion at the same time Friday. During the day, the yield on the 6.79%, 2034 bond is seen at 6.81-6.88, and that on the most-traded 7.10%, 2034 bond is seen at 6.83-6.90%. (Siddhi Chauhan)

India Gilts: Seen opening higher on fall in US yields

MUMBAI – Prices of government bonds are seen up on a fall in US Treasury yields over the weekend, dealers said. Volumes might remain tepid during the day as traders will be watchful ahead of India's Jul-Sept GDP data, due Friday. 

The yield on the 6.79%, 2034 bond is seen at 6.81-6.88%, against 6.85% on Friday. The yield on the most-traded 7.10%, 2034 bond is seen at 6.83-6.90%, against 6.87% Friday. 

The yield on the 10-year benchmark US Treasury note fell to 4.35% from 4.39% at the close of Indian market hours Friday. Investors welcomed US President-elect Donald Trump's pick for Secretary of Treasury, Scott Bessant. Increasing odds of a sharp rate cut in Europe in December also pulled down US yields.

This week, key US economic data is due, including estimates for GDP growth and the release of the Federal Reserve's preferred inflation gauge. The November US Federal Open Market Committee's meeting minutes will also be released later this week. These could lead to some volatility in gilt prices, though the impact may be limited as activity from foreign banks has decreased near the year-end, dealers said.

Domestic traders will look out for further news on geopolitical tensions both in the Russia-Ukraine conflict and in West Asia, dealers said. Iran-backed Hezbollah and Israel continued to attack each other on the weekend.

Back home, the 6.79%, 2034 bond is likely to become the most-traded security in December, and traders are increasingly looking to it as the 10-year benchmark gilt, dealers said. After its auction on Friday, the outstanding in the paper will grow to INR 660 billion. Traders may trim their holdings of the 7.10%, 2034 bond and pick up the newer gilt, dealers said.  (Srijita Bose)

End

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

Edited by Deepshikha Bhardwaj

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