Informist, Tuesday, Nov 7, 2023

By Nishat Anjum

MUMBAI – Prices of government bonds ended higher today tracking an intraday fall in US Treasury yields and crude oil prices, dealers said. Some traders also covered their short bets, which further aided the gilt prices.

The 10-year benchmark 7.18%, 2033 bond closed at 99.29 rupees, or 7.28% yield, against 99.11 rupees, or 7.31% yield, on Monday.

"The movement was sudden, so everybody started pitching their own theories," a dealer at a state-owned bank said. "But, most probably it was the spree of short covers, as US yields fell, that moved the market."

That the Reserve Bank of India has so far not yet announced an open market operation sale auction also led to optimism that it would hold off an auction till the end of the month. Moreover, the easing in US Treasury yields would keep the spreads between India's debt and the haven asset at a comfortable level for the RBI, dealers said.

A section of the market also believes there would be no open market operation sales this calendar, dealers said.

Traders also looked ahead to the news on the inclusion of Indian government bonds in the Bloomberg Index Services Ltd's widely-tracked Global Aggregate index. The index provider is expected to conclude its Advisory Council meetings by this week or the next, and a large section of the market expects Indian bonds to be announced for inclusion, dealers said.

In September, JP Morgan announced it would include Indian government bonds in its Global Bond Index – Emerging Markets suite from Jun 28 over a 10-month period. Inclusion on Bloomberg's bond indices would lead to $10 bln-$15 bln of inflows at the time Indian bonds are added, dealers said.

"The decision is due next week. So, there is no point in buying this rumour right now," a dealer at a primary dealership said. "The market just tracked US yields. Also, crude also fell during the day."  

Crude oil prices fell intraday, erasing most of Monday's gains, as the impact of output cut extensions by Saudi Arabia and Russia was countered by mixed economic data from China, the world's second-largest oil consumer, and concerns about winter demand.

During the day, Brent crude oil futures for January delivery slumped to a low of $83.22 per barrel, the lowest level in two months.

China's export in October contracted more than expected, even though imports rose sharply on year. China's exports dropped 6.4% on year in October, the country's General Administration of Customs said today. The decline in exports was higher than the 3.5% fall projected in a poll by The Wall Street Journal.

For most part of the day, bonds traded in a thin band due to lack of firm domestic cues, dealers said. An overnight rise in US Treasury yields also weighed on government bonds.

Yield on the benchmark 10-year US Treasury note rose to 4.65% early in trade from 4.59% at the time of Indian market close on Monday. The yield on the 10-year US Treasury note rose as investors shifted their focus from weak jobs data to a slew of upcoming speeches by US Federal Reserve officials during this week.

US Federal Reserve Chair Jerome Powell is due to speak on Wednesday and Thursday, where investors will gauge his speech to see whether he maintains his dovish tone that was seen in the Federal Open Market Committee meeting outcome last week.

According to data on the RBI's Negotiated Dealing System-Order Matching platform, the turnover was 409.55 bln rupees, compared with 334.75 bln rupees on Monday. There were four trades using the wholesale digital rupee pilot today worth 300 mln rupees, against two trades worth 200 mln rupees the previous day.

OUTLOOK

On Wednesday, gilts may open steady as traders may avoid aggressive bets due to lack of significant domestic cues, dealers said. A sharp move in US Treasury yields and crude oil prices may also lend cues at the opening.

The yield on the 10-year benchmark 7.18%, 2033 bond is seen in a range of 7.25-7.32%.

India Gilts: Rise further as US ylds, crude oil prices fall intraday

NEW DELHI--1630 IST--Government bond prices rose further led by short covering from traders as both US Treasury yields and crude oil prices fell intraday, dealers said.

"Demand looks to be trader-led right now, from the fall in US yields," a dealer at a foreign bank said.

The yield on the 10-year US Treasury note was at 4.59%, down 6 basis points intraday. Brent crude for January delivery was down nearly 2% from Monday's settlement, at $83.58 a barrel.

The lack of a bond sale auction announcement by the Reserve Bank of India so far also led to optimism that the central bank would hold off on an auction before the end of November. Moreover, the easing in US Treasury yields would keep the spreads between India's debt and the haven asset at a comfortable level for the RBI, dealers said.

Some sections of the market even expected that there would be no RBI bond sales through auction until the end of December, dealers said.

Traders also looked ahead to the news on the inclusion of Indian government bonds on the Bloomberg Index Services Ltd's widely-tracked Global Aggregate index. The index provider is expected to conclude its Advisory Council meetings by this week or the next, and a large section of the market expects Indian bonds to be announced for inclusion, dealers said.

In September, JP Morgan announced it would include Indian government bonds in its Global Bond Index – Emerging Markets suite from Jun 28 over a 10-month period. Inclusion on Bloomberg's bond indices would lead to $10 bln-$15 bln of inflows at the time Indian bonds are added, dealers said.

"There is nothing in the market on this except for speculation," a dealer at a private bank said. "There is some positivity on that, but right now market is tracking US yields and crude only."

According to data on the Reserve Bank of India's Negotiated Dealing System--Order Matching platform--the market-wide turnover was 375.25 bln rupees, compared with 300.60 bln rupees at 1630 IST on Monday. 

During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.29-7.33%. (Aaryan Khanna)

India Gilts: Up as 10-yr US yield falls 5 bps intraday; volume dull

MUMBAI--1501 IST--Prices of government bonds rose, reacting to an intraday fall in the yield on the 10-year US Treasury note, dealers said. However, the gains were limited as traders avoided placing aggressive bets in the market in the absence of significant domestic cues. 

"Tad up as US yields have fallen by 3-4 basis points, so our market is probably tracking that," a dealer at a state-owned bank said. "At this level we may see some profit booking by PSU's (state-owned banks) while foreign banks and mutual funds are on the buying side."

Dealers speculated that state-owned banks were selling gilts at profit at the level of 7.30% on the 10-year benchmark bond. 

The state government auction results were largely on expected lines, which failed to give firm domestic cues to the market, dealers said. 13 states raised 257.50 bln rupees at the bond auction today. 

Meanwhile, the yield on the 10-year US Treasury note fell to 4.60% from 4.65% in early trade. A fall in US Treasury yields widens the interest rate differential between the safe-haven asset and emerging market debt, making the latter more appealing to foreign investors. 

US Treasury yields fell in European trade as the market awaited comments from US Federal Reserve officials lined up in the week.

Further, the volume remained lacklustre and there was no active buying and selling momentum in the secondary market, dealers said. This resulted in minimal price movement in the 10-year benchmark, 7.18%, 2033.

On the global front, the market may take fresh cues from the US inflation data lined up for next week, dealers said.

According to data on the Reserve Bank of India's Negotiated Dealing System--Order Matching platform--the market-wide turnover was 261.40 bln rupees, compared with 244.55 bln rupees at 1530 IST on Monday. 

During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.29-7.33%. (Anupreksha Jain)

India Gilts: In thin band; mkt eyes state loan auction result

MUMBAI--1251 IST--Prices of government bonds traded in a thin band due to lack of significant domestic cues, dealers said. Moreover, the market kept a close watch on the state government security auction to gauge investors' interest. 

"There is no price movement and volumes have completely dried down," a dealer at a state-owned bank said. "After opening, the movement has stuck at these levels only. No trigger is there in the market."

During the day, the trade volumes remain low as dealers avoid placing large bets. As a result, dealers keenly await the state government security auction to lend significant cues to the market. 

Today, 13 states will raise 257.50 bln rupees via bond sales. The amount is higher than the 216 bln rupees notified in the indicative calendar for Oct-Dec. Going forward, dealers speculated that ahead of the state elections, some states may borrow higher than indicated. 

Moreover, the demand for Rajasthan's 23-year paper was expected to be aggressive. Dealers speculated that insurance companies and provident funds bid for the longer-term paper. Meanwhile, the demand for the 10-year paper and the short-term paper was also seen as robust, dealers said.

According to an Informist poll, the cut-off yields on states' 10-year bonds are seen in the range of 7.70-7.72%.

At the auction, the demand for most papers was seen as moderate, while the market was divided in the case of Bihar's 15-year paper and West Bengal's 17-year paper. The cut-off expectations for the 15-year paper are seen in the wide range of 7.65-7.78% for the 15-year bond, and while that of the 17-year paper are seen in the range of 7.66-7.80%, according to a poll by Informist. 

The market remained divided in the case of the above-mentioned papers, as a section thought insurance companies would have aggressively bid, while others expected the supply pressures to weigh on the bonds. Moreover, the dealers expected Bihar's and West Bengal's papers to have cut-offs on a slightly higher side, due to the states' weaker fiscal health.

On the global front, a rise in the yield on the benchmark 10-year US Treasury note weighed on the price of gilts. Yield on the paper rose 6 basis points to 4.65% from 6.59% at the time of Indian market close on Monday. The yield on the 10-year benchmark US Treasury note rose as investors shifted their focus from weak jobs data to a slew of upcoming speeches by US Federal Reserve officials during this week.

According to data on the Reserve Bank of India's Negotiated Dealing System--Order Matching platform--the market-wide turnover was 75.80 bln rupees, compared with 129.70 bln rupees at 1230 IST on Monday. 

During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.29-7.33%.  (Siddhi Chauhan)

India Gilts: Largely unchanged as mkt lacks firm domestic cues

MUMBAI--0940 IST--Prices of government bonds were largely unchanged as the market remained devoid of significant domestic cues, dealers said. An overnight rise in US Treasury yields weighed on gilts.

"There is no clarity in the market regarding OMO (open market operations sale). There are no other cues also to move the market," a dealer at a state-owned bank said. "I expect the 10-year (7.18%, 2033 bond) to move in the range of 7.28-7.32% till the market gets some firm cues."

Trade volume also remained low as traders avoided placing large bets due to a lack of firm domestic cues, dealers said. Volume was concentrated in the long-term papers, which has been the case for the last few weeks.

Short-term papers have fallen out of favour amid tight liquidity conditions in the banking system, dealers said. At the start of trade today, liquidity in the banking system was estimated to be in a deficit of 46.86 bln rupees.

Meanwhile, the yield on the benchmark US 10-year note rose to 4.65% in early trade from 4.59% at the time of Indian market close on Monday. The yield on the 10-year benchmark US Treasury note rose as investors shifted their focus from weak jobs data to a slew of upcoming speeches by US Federal Reserve officials during this week.

After better-than-expected US jobs data released last week, the market expected the 10-year US Treasury yield to inch towards the crucial 4.50%-level. However, with a slew of US Federal Reserve officials lined up to speak this week, it is unlikely that traders would bet aggressively ahead of that, dealers said.

According to data on the RBI's Negotiated Dealing System--Order Matching platform--the market-wide turnover was 14.40 bln rupees compared with 33.70 bln rupees at 0930 IST on Monday.

During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.29-7.33%.  (Nishat Anjum)

India Gilts: Seen down on rise in US yields; volume to remain low

MUMBAI – Prices of government bonds are expected to open slightly lower, tracking a rise in the yield on the 10-year benchmark US Treasury note, dealers said. The volume is also likely to remain dull as traders may avoid placing large bets amid a lack of firm domestic cues in the market. 

The yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.29-7.34% today, as against 7.31% on Monday. Traders may look at the state government securities auction result to gauge investors' appetite, dealers said. Today, 13 states will look to raise 257.50 bln rupees via bond sales. The amount is higher than the 216 bln rupees notified in the indicative calendar for Oct-Dec.

The market will improve slightly if demand at the auction is aggressive, dealers said. Otherwise, it may not have much impact on the market's movement.

Meanwhile, the yield on the benchmark US 10-year note rose to 4.65% in Asian trade today from 4.59% at the time of Indian market close on Monday. A rise in US Treasury 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 as investors shifted their focus from weak jobs data to a slew of upcoming speeches by US Federal Reserve officials during this week. Investors may assess the speech by US Federal Reserve Chair Jerome Powell, who is scheduled to speak on Wednesday and Thursday, for fresh global cues, dealers said.

During the day, traders may closely track the movement in the yield on the 10-year US Treasury note as the market may remain devoid of significant domestic cues, dealers said. (Anupreksha Jain)

End

US$1 = 83.26 rupees

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

Edited by Ashish Shirke

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