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Informist, Wednesday, Nov. 27, 2024

MUMBAI – Prices of government bonds ended higher tracking an intraday fall in US Treasury yields, dealers said. Receiving of fixed rates in overnight indexed swap rates also aided the rise in bond prices.

The 10-year benchmark 6.79%, 2034 bond ended at INR 99.83, or 6.81% yield, against INR 99.73, or 6.83% yield, Tuesday. The 7.10%, 2034 bond closed at INR 101.76, or 6.84% yield, against INR 101.66, or 6.86% yield, Tuesday.

Volumes picked up in the latter part of the trading session as the yield on the 10-year US Treasury note fell to 4.26%, its lowest level since Nov. 1. US yields fell ahead of a slew of economic data due later in the day. The second estimate for US Jul-Sept GDP is due at 1900 IST and the personal consumption expenditures data, the US Federal Reserve's preferred inflation gauge, are due at 2030 IST.

While domestic traders were not significantly readjusting portfolios ahead of the US data, dealers said they were cautious and avoided large bets in the early part of the day. However, the falling US yields were a positive cue for traders and the market-wide turnover jumped, likely due to foreign inflows, dealers said. Foreign investors may have picked up fully accessible route bonds ahead of the increase in India's weightage on JP Morgan's Government Bond Index – Emerging Markets on Friday, they said.

"Till 1430-1500 IST volumes were dull. After that, possibly, some flows would have been coming, and (bond prices were) supported by US Treasury (yields) also," a dealer at a private bank said.

The presence of a deposit insurer in the secondary market also pushed up prices in the latter part of the session, dealers said. The entity is expected to also pick up bonds at the weekly gilts auction Friday, they said. On Tuesday, the segment consisting of insurance companies, provident funds, and the Reserve Bank of India was the largest buyer, according to data from the Clearing Corp. of India.

"Our bond market is a repercussion of OIS, OIS directly follows any global cues much closer than gilts. Swaps supported gilts today... and state-owned banks were making spontaneous purchases, here and there," a dealer at a state-owned bank said.

Overnight indexed swap rates also fell, tracking a fall in US yields. Offshore traders were probably receiving fixed rates, in the hope of US data improving the possibility of a December rate cut by the US Federal Reserve, dealers said. The five-year OIS rate fell to 6.19%, from 6.22% at Tuesday's Indian market close. The fall in rates translated to rising prices in gilts, but gains were capped by some intraday selling for profit, and caution before the US data.

Traders were likely picking up bonds to build portfolios ahead of India's GDP print for Jul-Sept, due Friday. Traders are expecting readings as low as 6.4%, against the Reserve Bank of India's forecast of 7%. Earlier in the day, prices rose slightly as crude oil prices eased on reports of a ceasefire deal brokered by the US between Israel and Iran-backed militant group Hezbollah in Lebanon.

According to the RBI's Negotiated Dealing System-Order Matching platform, the market turnover was INR 307.60 billion, against INR 299.30 billion Tuesday. No trades were settled using the wholesale digital rupee pilot Wednesday, same as Tuesday.

OUTLOOK

On Thursday, the market may take cues from the movement in US yields after inflation and growth data, dealers said. While lower readings are expected and may be priced in, any slowing growth or fall in inflation may see the 10-year US yield falling below 4.25%.

The second estimate for US Jul-Sept GDP data was unchanged at 2.8%, in line with Dow Jones estimates. US unemployment claims for the week ended Saturday fell by 2,000 to 213,000 against a Dow Jones estimate of 215,000. The 10-year US yield was little changed following the data.

The US personal consumption expenditures data, the Fed's preferred inflation gauge, are due 2030 IST. The Personal Consumption Expenditures Price Index is seen at 2.3% on year in October from 2.1% in September.

Traders may realign portfolios ahead of the release of India's Jul-Sept GDP print, due 1600 IST Friday, as the print will be the last major data point before the meeting in December of the Reserve Bank of India's Monetary Policy Committee, dealers said.

The yield on the 6.79%, 2034 bond is seen at 6.78-6.84% Thursday. The yield on the 7.10%, 2034 bond is seen at 6.81-6.87%.

India Gilts: Up on fall in US yields, FPI inflows before index rebalance

MUMBAI--1615 IST--Prices of government bonds were up tracking an intraday fall in US Treasury yields, dealers said. Trade volumes rose due to purchases by foreign portfolio investors, even as domestic traders stayed on the sidelines ahead of key economic data.

"The market is up by purely tracking US yields and some passive inflows from foreign investors, but the overall market is very range-bound and the low volumes are telling a different story," a dealer at a primary dealership said.

The yield on the 10-year US Treasury note fell to 4.26% from a high of 4.31% earlier. While foreign investors were not large buyers due to the fall in US yields, index-tracking funds likely picked up India's gilts ahead of the month-end rebalancing of J.P. Morgan's Government Bond Index–Emerging Markets. The weight of India's fully accessible route bonds on the benchmark index will rise to 6% on Friday.

However, traders avoided large bets before the US Personal Consumption Expenditures data, which is a preferred measure for inflation by the US Federal Reserve. The second estimate of US GDP for the quarter ended September is also awaited, both post market hours Wednesday. 

Domestic investors lacked the appetite to pick up gilts in large volumes after already buying in previous sessions, dealers said. Traders also sold bonds at a profit, capping gains as traders awaited India's Jul-Sept GDP data on Friday. Most traders had already aligned their portfolios to prepare for a much lower print than the Reserve Bank of India's estimate of 7%, dealers said. According to the median of an Informist poll, Jul-Sept GDP growth fell to a six-quarter low of 6.5%.

According to data on the RBI's Negotiated Dealing System-Order Matching platform, the market-wide turnover was INR 252.70 billion, against 247.20 INR billion at 1630 IST Tuesday. During the day, the yield on the 6.79%, 2034 bond is seen at 6.79-6.86%, and that on the 7.10%, 2034 bond is seen at 6.80-6.89%.  (Srijita Bose)

India Gilts: Remain up on fall in US ylds; volumes low before key economic data

MUMBAI--1419 IST--Prices of government bonds remained higher tracking a fall in US Treasury yields intraday, but volumes were muted as traders were cautious ahead of key US data points lined up post market hours. India's GDP data for Jul-Sept is also awaited, due Friday, dealers said.

The second estimate for US Jul-Sept GDP data is due at 1900 IST, and Dow Jones sees it unchanged at 2.8%, dealers said. The US personal consumption expenditure inflation data, which is the Federal Reserve's preferred inflation gauge, is due at 2030 IST. The PCE index is seen at 2.3% on year in October from 2.1% in September.

"While the data is most likely favourable for the market, PCE is one exception... if it's anything higher than that (2.3%), yields will harden," a dealer at a state-owned bank said. "There is no market consensus on what the data will be, that's why there's no direction in the market, it is barely moving."

With the US data likely to be significant for the view on interest rate cuts in the world's largest economy, traders were cautious and avoided large bets, dealers said. Most readjusted their portfolios to reduce their exposure to the data, even as comments from US Federal Reserve officials in recent days suggested another US rate cut was coming in December, dealers said. According to the CME FedWatch tool, odds of a December rate cut by the US Federal Open Market Committee were at 66.3%. The remaining one-third bets were on a pause in rate cuts, after 75 basis points of easing since September.

According to data on the RBI's Negotiated Dealing System-Order Matching platform, the market-wide turnover was INR 141.40 billion, against INR 164.75 billion at 1430 IST Tuesday. During the day, the yield on the 6.79%, 2034 bond is seen at 6.79-6.86%, and that on the 7.10%, 2034 bond is seen at 6.80-6.89%.  (Cassandra Carvalho)

India Gilts: Tad up on slight ease in crude prices; traders cover short bets

MUMBAI--1038 IST--Prices of government bonds were a tad up due to a slight ease in crude oil prices after reports of a ceasefire between Israel and Iran-backed Hezbollah in Lebanon. Traders also likely covered some short bets ahead of India's Jul-Sept GDP data on Friday, dealers said.

"The risk-to-reward ratio is much lower, and it doesn't make sense to short on the data as it is coming anyway within market hours," a dealer at a private bank said. 

India's GDP data for the September quarter is due at 1600 IST Friday. Traders expect a much lower growth rate than the Reserve Bank of India's 7% forecast, making the case for a quicker pace of rate cuts, dealers said. 

An Informist poll of 21 economists pegged India's GDP growth in Jul-Sept at a six-quarter low of 6.5%. A significant slowdown in growth to near 6% could prompt bets on repo rate cuts in December, though the market consensus remains that cuts will happen in February, dealers said. In Apr-Jun, India's GDP growth slowed to 6.7%, the lowest in five quarters.

Traders are likely to be cautious, and trade volumes are expected to be muted ahead of US personal consumption expenditure data and the second estimate of US Jul-Sept GDP post market hours, dealers said. With geopolitical tensions easing and US yields off earlier highs in November, dealers were of the view that India's bond prices may not fall sharply before fresh triggers.

According to data on the RBI's Negotiated Dealing System-Order Matching platform, the market-wide turnover was INR 32.20 billion, against 54.60 INR billion at 1030 IST Tuesday. During the day, the yield on the 6.79%, 2034 bond is seen at 6.79-6.86%, and that on the 7.10%, 2034 bond is seen at 6.80-6.89%.  (Srijita Bose)

India Gilts: Seen steady ahead of key US economic data

MUMBAI – Prices of government bonds may open steady due to the lack of firm cues as traders will largely track the movement in US Treasury yields ahead of key US economic data, due later in the day, dealers said. Short bets ahead of India's Jul-Sept GDP data may also increase during the day. 

The yield on the 6.79%, 2034 bond is seen at 6.79-6.86%, against 6.83% on Tuesday. The yield on the 7.10%, 2034 bond is seen at 6.80-6.89%, against 6.86% Tuesday.

US Treasury yields remained largely unchanged since Tuesday's market close at 1700 IST. The Federal Open Market Committee's minutes of its November meeting, released early Wednesday, hinted at further easing of rates but at a gradual pace.

Traders may remain cautious and avoid large bets before the release of the US Personal Consumption Expenditures data for October, due after market hours. This measure is preferred by the Federal Reserve and guides its decisions on monetary policy. The second estimate of US GDP for the quarter ended September will also be released Wednesday at 1900 IST. 

Meanwhile, traders may pick up bonds as geopolitical tensions in West Asia may reportedly ease. According to media reports, the US brokered a 60-day ceasefire between Israel and Iran-backed Hezbollah in Lebanon.  (Srijita Bose)

End

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

Edited by Rajeev Pai

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