Informist, Tuesday, Feb 27, 2024

By Siddhi Chauhan

MUMBAI – Prices of most government bonds ended steady due to lack of firm domestic cues, dealers said. The market remained lacklustre throughout the day, with some traders trimming their bond holdings at the end of trade.

The 10-year benchmark 7.18%, 2033 bond closed at 100.74 rupees, or 7.07% yield, today compared with 100.79 rupees, or 7.06% yield, on Monday.

A rise in US Treasury yields weighed on government bonds, dealers said. "The only thing that moved the market today was US Treasury yields. The market today lacked cues leading to low volumes," a dealer at a state-owned bank said. "Traders are actually waiting for US PCE (personal consumption and expenditure data) and the (domestic) GDP data that are both due on Thursday." 

During the day, the market tracked a slight uptick in US Treasury yields, dealers said. A rise in US yields narrows the interest rate differential between the safe-haven asset and emerging market debt, making the latter less appealing to foreign investors.

The yield on the 10-year benchmark US Treasury note rose to the day's high of 4.29%, against 4.25% at the time of Indian markets close on Monday. US yields rose slightly ahead of the personal consumption and expenditure data for January, due Thursday. The core personal consumption and expenditure data is the US Federal Reserve's preferred inflation gauge. A Dow Jones poll showed that personal income is expected to rise 0.3% on month, the same as in December. Consumer spending is seen increasing 0.2% on month, lower than the 0.7% increase in December.

Through most of the day, prices have traded in a thin band as the market didn't have any significant cues to track, dealers said. As a result, traders hoped the state government securities auction may lend some cues to the market. However, the auction result came along expected lines, leaving little to no cues for the market to track. The Reserve Bank of India set the cut-off of 7.42-7.46% on the 10-year state bonds. According to a poll by Informist, the cut-off yield on the 10-year state bonds was expected to be around 7.43-7.46%. 

The market now looks forward to the next cue on the domestic front, which is India's GDP estimates for Oct-Dec due on Thursday. A poll conducted by Informist shows that India's GDP growth for Oct-Dec is likely to have slowed down to a three-quarter low of 6.6%, mainly as the statistical effect of a low base normalises. 

The yield on the 7.18%, 2033 bond would fall to 7.02% if the Oct-Dec GDP growth is 6% or below, dealers said. The yield on the 10-year benchmark gilt will rise to 7.10% if the GDP growth is 7% or above, they said.

"Trade is happening but in light volumes. PSU banks (state-owned banks) were selling the 14-year bond (7.18%, 2037 bond) and buying the 10-year (7.18%, 2033 bond)," a dealer at another state-owned bank said. "Apart from PSU banks, private banks could also be buying the 10-year paper, as these are buying levels."

Dealers speculated that state-owned banks and private banks bought the benchmark 7.18%, 2033 gilt around the 7.07% level, which is considered lucrative. According to data from Clearing Corp of India Ltd, private banks were the top net buyers on Monday. 

Meanwhile, short-term bonds remained out of favour as the prevailing liquidity conditions and uncertainty regarding rate cuts weighed on these, dealers said. At the end of trade on Monday, the liquidity deficit in the banking system was 2.41 trln rupees, as against 2.14 trln rupees on Sunday, data from the Reserve Bank of India showed.
 

The banking system liquidity has remained in a deficit of over 1 trln rupees since mid-December. This has kept traders from aggressively buying the short-term bonds which have remained out of favour for the most part since then, dealers said. Apart from that, the consistent shifting of rate-cut view on the domestic front has also weighed on these bonds, dealers said.
 

According to data on the RBI's Negotiated Dealing System-Order Matching platform, the turnover was 255.35 bln rupees, down from 299.85 bln rupees on Monday. No trade was carried out using the wholesale digital rupee pilot today, as against four trades worth 200 mln rupees on Monday.

OUTLOOK

On Wednesday, bond prices may open steady as traders may avoid aggressive bets due to lack of significant domestic cues, dealers said. 

Any sharp movement in US Treasury yields or crude oil prices may lend cues at the opening. The yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.05-7.9% during the day.

India Gilts: Little changed; volumes concentrated in long-term bonds
 

MUMBAI--1530 IST--Prices of government bonds remained largely steady as traders lacked firm cues to place aggressive bets, dealers said. Amidst thin trade, volumes were concentrated in longer-term bonds as the liquidity deficit in the banking system kept short-term bonds out of favour. 

At the end of trade on Monday, the liquidity deficit in the banking system was 2.41 trln rupees, as against 2.14 trln rupees on Sunday, data from the RBI showed. Banking system liquidity has remained in a deficit of over 1 trln rupees since mid-December, and has kept short-term bonds out of favour for the most part since then, dealers said. 

"With no auctions, there is no shorting activity, no covering...the market has become really dull," a dealer at a state-owned bank said. "Just some 14 cross 10 spread trading (7.18%, 2037 bond and 7.18%, 2033 bond), besides which, nothing." 

Some state-owned banks and private banks likely bought the benchmark 7.18%, 2033 gilt at 7.07% yield, which is considered lucrative, dealers speculated. Private banks were the top net buyers on Monday, data from the Clearing Corp of India Ltd showed. Some traders trimmed their holdings in 7.18%, 2037 bond, dealers said. 

The market looks forward to India's GDP estimates for Oct-Dec, to be released on Thursday, dealers said. According to an Informist poll, India's GDP growth in Oct-Dec is likely to have slowed down to a three-quarter low of 6.6%. The yield on the 10-year benchmark gilt would fall to 7.02% if the Oct-Dec GDP growth is 6% or below, dealers said. The yield on the 10-year benchmark gilt will rise to 7.10% if the GDP growth is 7% or above, they said.

According to data on the RBI's Negotiated Dealing System--Order Matching platform--the market-wide turnover was 188.60 bln rupees, as against 200.40 bln rupees at 1530 IST on Monday.

For the rest of the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.05-7.09%. (M.C. Adhiinthran)

India Gilts: In thin band; state loan auction fails to lend firm cues

MUMBAI--1336 IST--Prices of government bonds were in a thin band due to lack of significant cues, dealers said. The state loan auction result failed to render significant cues to the market, dealers said. 
 

"The state loan auction result didn't give cues to the market as it came on the expected lines. As a result, the market may remain range bound." a dealer at a state-owned bank said. "The next cue for the market is the GDP data that will be released on Thursday." 

As the market remained devoid of significant cues, traders had fixed their eyes on the result of the state government securities auction. However, the result of the state government auction that took place during the day, failed to lend significant cues to the market, dealers said.  At the auction, 12 states sold bonds aggregating to 328.49 bln rupees.

The volume remains lacklustre as traders remained at bay due to insignificant domestic cues, dealers said. Traders now look forward to the next domestic cue, which is, India's GDP estimates for the December quarter, due Thursday, dealers said. A poll conducted by Informist shows that India's GDP growth for Oct-Dec is likely to have slowed down to a three-quarter low of 6.6%, mainly due to the statistical effect of a low base.

Meanwhile, the yield on the 10-year benchmark US Treasury note inched higher to 4.29%, from 4.25% at the time of Indian markets close on Monday. US yields rose slightly ahead of the personal consumption and expenditure data for January, due Thursday. The inflation print is the US Federal Reserve's preferred inflation gauge. A Dow Jones poll showed expectations of 0.3% on-month rise, the same as in December. Consumer spending is seen increasing 0.2% on month, lower than a 0.7% increase in December. 
 

According to data on the RBI's Negotiated Dealing System--Order Matching platform--the market-wide turnover was 132.70 bln rupees, as against 157.10 bln rupees at 1230 IST on Monday.

During the day, yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.05-7.09%. (Siddhi Chauhan)

India Gilts: Little changed on lack of firm domestic cues; volumes low
 

MUMBAI--0920 IST--Prices of government bonds were little changed in early trade as traders avoided placing aggressive bets on lack of firm domestic cues. Volumes were low as traders avoided large bets ahead of the state loan auction.

Volumes remained concentrated in the longer-term bonds due to the ongoing tight liquidity in the banking system, dealers said. At the end of trade on Monday, the liquidity deficit in the banking system was at 2.41 trln rupees.

"There was some hit by a rise in US Yields in the first few trades. Since the movement in US yields was also small, it didn't impact much," a dealer at a primary dealership said. "Also, there is data due in the US, so I expect a restricted movement."

Traders looked forward to the state loan auction, scheduled later in the day, to gauge the investors' demand, dealers said. State government securities are lucrative for investors' asset liability management needs as they are traded at a spread over the central government securities. At the auction, 12 states will raise 328.49 bln rupees through the sale of state bonds.

In the week, there is data due both on the global and domestic front which added caution to the market, dealers said. In the US, the personal consumption and expenditure data, US Federal Reserve's preferred inflation gauge, for January, is scheduled for release on Thursday. According to a Dow Jones poll, personal income is expected to rise 0.3% on month, the same as in December.

On the domestic front, traders awaited India's GDP estimates for the December quarter, due Thursday, dealers said. A poll conducted by Informist shows that India's GDP growth for Oct-Dec is likely to have slowed down to a three-quarter low of 6.6%, mainly due to the statistical effect of a low base.

According to data on the RBI's Negotiated Dealing System--Order Matching platform--the market-wide turnover was 23.45 bln rupees, as against 47.50 bln rupees at 0930 IST on Monday.

During the day, yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.05-7.09%. (Nishat Anjum)

India Gilts: Seen tad lower as US yields inch higher overnight

MUMBAI – Prices of government bonds are seen opening a tad lower as US Treasury yields inched higher overnight, dealers said. The market may take cues from the state bond auction today, at 1030-1130 IST. 

The yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.04-7.10%, against 7.06% on Monday. 

The yield on the 10-year benchmark US Treasury note inched higher to 4.28%, from 4.25% at the time of Indian markets close on Monday. A rise in US yields narrows the interest rate differential between the safe-haven asset and emerging market debt, making the latter less appealing to foreign investors.

US yields rose slightly ahead of the personal consumption and expenditure data for January, due Thursday. The inflation print is the US is the US Federal Reserve's preferred inflation gauge. A Dow Jones poll showed expectations of 0.3% on-month rise, the same as in December. Consumer spending is seen increasing 0.2% on month, lower than a 0.7% increase in December.

Today, 12 states will raise 328.49 bln rupees through the sale of state bonds. The amount up for auction is far lower than the 451.60 bln rupees indicated. Since the fresh issue of gilts ended on Feb 16, domestic investor demand will be concentrated in state bond auction, dealers said. 

The market will look forward to India's GDP estimates for Oct-Dec, releasing on Thursday, dealers said. The Reserve Bank of India expects a growth of 6.5% in the period, lower than last quarter's growth of 7.6%. A poll conducted by Informist shows that India's GDP growth for Oct-Dec is likely to have slowed down to a three-quarter low of 6.6%, mainly due to the statistical effect of a low base effect. (M.C. Adhiinthran)

End

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

Edited by Tanima Banerjee

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