Informist, Thursday, Dec 7, 2023

By Nishat Anjum

MUMBAI – Prices of government bonds rose today as traders covered their short bets on caution ahead of the outcome of the Monetary Policy Committee meeting, due on Friday at 1000 IST, dealers said. A fall in US Treasury yields also aided gilt prices, they said.

The 10-year benchmark 7.18%, 2033 bond closed at 99.59 rupees, or 7.24% yield, against 99.49 rupees, or 7.25%, on Wednesday.

"It usually goes slightly up ahead of the policy, people would have covered their short bets and taken positions according to their views," said a dealer at a primary dealership. "I think a very few participants are dovish, so probably they bought ahead of policy."

For most of the day, volume remained low as traders avoided placing large bets ahead of the policy meeting outcome, dealers said. The market widely expects the panel to maintain the status quo, but traders stayed on the sidelines to avoid heavy portfolios ahead of the policy meeting outcome.

Short-term papers remained out of favour as liquidity has slipped back into a deficit, dealers said. At the end of trade on Wednesday, liquidity in the banking system was in a deficit of 25.04 bln rupees, according to the Reserve Bank of India data.

The key takeaway from the policy is expected to be on the liquidity front, dealers said. Market players also seek clarity from the RBI on open market operations sale auctions, a worrying factor since the October meeting of the panel. The domestic rate-setting panel is expected to keep the repo rate unchanged at 6.50% and the policy stance at "withdrawal of accommodation", dealers said.

The market is particularly keen on RBI Governor Shaktikanta Das's comments on liquidity and open market operations sales auction, dealers said. 

"Now that we are moving towards general elections, there might be an upsurge in liquidity, so the RBI needs to be cautious, as all that liquidity could be inflationary. So, I don't see them taking a dovish tone at all," said Rajeev Pawar, head of treasury, Ujjivan Small Finance Bank.

The market also awaits the central bank's commentary on the growth and inflation front, dealers said. According to an Informist poll, most respondents expect the RBI to revise its GDP growth forecast for 2023-24 (Apr-Mar) by up to 30 basis points from the current projection of 6.5% after the economy grew at a robust 7.6% in Jul-Sep.

The market expects the inflation print for November to inch towards 6% led by a rise in food prices, dealers said. "Even from the RBI's side, there's been a lot of mention that food-driven inflation may spike up again for this month and the next month. So, if that's going to be there, they are going to take a cautious stand," said Pawar.

On the global front, the yield on the benchmark 10-year US Treasury note fell to a three-month low of 4.12% at Wednesday's settlement from 4.20% at the end of Indian market hours on Wednesday. Data from Automatic Data Processing Inc showed that private payrolls in the US rose by 103,000 jobs last month, below forecasts of 130,000 job gains.

Following the private forecaster's data, investors priced in a weak payrolls number from the US government, due to be released on Friday. The November data is expected to show that employers added 180,000 jobs during the month, according to the median estimate of economists polled by Reuters.

According to data on the RBI's Negotiated Dealing System-Order Matching platform, the turnover was 351.50 bln rupees, compared with 360.05 bln rupees on Wednesday. There were no trades today using the wholesale digital rupee pilot for the third straight day.

OUTLOOK

On Friday, gilt prices are seen opening steady as traders may avoid aggressive bets ahead of the outcome of the Monetary Policy Committee meeting at 1000 IST, dealers said. 

All 25 respondents in an Informist poll said they expect the rate-setting panel to keep the repo rate unchanged at 6.50%, and maintain the "withdrawal of accommodation" stance for the fifth consecutive time.

Even though higher food prices pose an upside risk to inflation and growth projections may be increased for 2023-24, there was some hope that the tone of the policy statement would not indicate any further policy tightening. 

A sharp move in US Treasury yields and crude oil prices may also lend cues at opening. 

The yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.22-7.30%.

India Gilts: Tad up in thin trade; mkt awaits MPC meet outcome Fri

India Gilts: Tad up in thin trade; mkt awaits MPC meet outcome Fri

MUMBAI--1459 IST--Prices of government bonds rose slightly in thin trade, following a fall in the yield on the 10-year benchmark US Treasury note, dealers said. Volume remained low as traders avoided placing large bets due to caution ahead of the outcome of a meeting of the Reserve Bank of India's Monetary Policy Committee on Friday.

"There is no volume in the market. Everyone is exiting their positions right now, especially PSUs (state-owned banks) and primary dealerships," a dealer at a state-owned bank said. "Nobody wants to take fresh positions until they get some clarity on liquidity during the announcement (MPC meeting outcome), till then selling will be continued."

Dealers speculated that private banks and foreign banks were on the buying side.

Volume was mostly concentrated in long-term papers, dealers said. With the system liquidity slipping back into deficit, the demand for short-term papers was low. At the end of trade on Wednesday, liquidity in the banking system was in a deficit of 25.04 bln rupees, as against a surplus of 115.59 bln rupees on Tuesday, according to RBI data. 

This is the first time in December that liquidity has gone into deficit, after hitting a surplus due to inflows in the form of the government's month-end spending.

On the policy front, the market expects the MPC meeting to be a non-event, but it will observe the tone of RBI Governor Shaktikanta Das's speech. When it comes to the repo rate and the policy stance, the market expects the panel to keep both unchanged, dealers said. Currently, the repo rate is at 6.50% and the RBI has maintained a 'withdrawal of accomodation' stance.

Meanwhile, the yield on the benchmark 10-year US Treasury note fell to 4.15% today from 4.20% at the end of Indian market hours on Wednesday. A fall in US yields aided gilt prices, dealers said.

Yields fell as traders assessed the ADP National Employment Report, which showed that private payrolls in the US rose by 103,000 last month, below the forecast of 130,000.

According to data on the RBI's Negotiated Dealing System-Order Matching platform, the market-wide turnover was 175.50 bln rupees at 1443 IST compared with 227.50 bln rupees at 1430 IST on Wednesday.

For the rest of the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.23-7.27%. (Anupreksha Jain)

India Gilts: In thin band amid low volume; MPC meet outcome Fri eyed

MUMBAI--1249 IST--Prices of government bonds moved in a thin band as traders abstained from placing aggressive bets on caution ahead of the outcome of the Monetary Policy Committee's meeting on Friday, dealers said. Volumes were low, which remained concentrated in the longer-term papers.

Short-term papers remain out of favour as liquidity has slipped back into a deficit, dealers said. At the end of trade on Wednesday, liquidity in the banking system was in a deficit of 25.04 bln rupees, against a surplus of 115.59 bln rupees on Tuesday, according to Reserve Bank of India data.

With all eyes on the outcome of the MPC meeting, the market is particularly keen on RBI Governor Shaktikanta Das's comments on liquidity and open market operations sales auction, dealers said.

"Last time (policy), the market was caught off-guard by the OMO comment from the governor," a dealer at a private-bank said. "This time, they are expecting some clarity, so they (bond prices) might not rally too much before the press conference if his comments are the same as last time. However, we cannot rule out the possibility of sharp movements before the press conference."

Most dealers expect the RBI governor's tone to be easy on Friday as the liquidity conditions and key data points have been comfortable. In the October meeting, the RBI governor said that their aim is to bring inflation down to the key 4% mark, and not keep it just in the tolerance band. The RBI's tolerance band for inflation is 2-6%, with 4% being the key target. India's CPI inflation fell to 4.87% in October from 5.02% in September.

The domestic rate-setting panel is expected to keep the repo rate unchanged at 6.50% and the policy stance at "withdrawal of accommodation", dealers said.

Meanwhile, the yield on the benchmark 10-year US Treasury note fell to 4.18% today from 4.20% at the end of Indian market hours on Wednesday. Yields fell as traders assessed the ADP National Employment Report, which showed that private payrolls in the US rose by 103,000 last month, below forecast of 130,000.

Moreover, crude oil futures fell nearly 4% on Wednesday to their lowest level since June after data from the Energy Information Administration showed US gasoline stocks rose by 5.4 mln barrels last week.

Brent crude oil future for February delivery was at $74.68 a bbl, as against $76.49 per bbl at the time Indian market closed the previous day.

According to data on the RBI's Negotiated Dealing System-Order Matching platform, the market-wide turnover was 125.50 bln rupees at 1249 IST compared with 144.05 bln rupees at 1230 IST on Wednesday.

During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.23-7.27%. (M.C. Adhiinthran)

India Gilts: Rise; mkt cautious ahead of MPC meet outcome Fri

MUMBAI--0930 IST--Prices of government bonds rose tracking positive global cues, dealers said. US Treasury yields and crude oil prices fell overnight, which also aided gilt prices.

However, the rise was limited as traders refrained from placing aggressive bets on caution ahead of the outcome of the Monetary Policy Committee's meeting, due Friday, dealers said.

"The market is slightly positive but not much because traders are cautious ahead of the MPC meeting outcome," a dealer at a private bank said. "Otherwise, following the downward trend in US yields, our market should have opened at least 2 basis points lower."

Volume also remained low as traders avoided placing large bets ahead of the policy meeting outcome, dealers said. The market widely expects the panel to maintain the status quo, but traders are likely to stay on the sidelines to avoid heavy portfolios ahead of the policy meeting outcome. 

The key takeaway from the policy is expected to be on the liquidity front, dealers said. Market players also seek clarity from the Reserve Bank of India on open market operations sale auctions, a worrying factor since the October meeting of the panel. The domestic rate-setting panel is expected to keep the repo rate unchanged at 6.50% and the policy stance at "withdrawal of accommodation", dealers said.

The yield on the benchmark 10-year US Treasury note fell to 4.14% in early trade from 4.20% at the end of Indian market hours on Wednesday. Further, the ADP National Employment Report showed that private payrolls in the US rose by 103,000 jobs last month, which was below forecasts of 130,000 jobs.

Meanwhile, crude futures fell nearly 4% on Wednesday to their lowest level since June after data from the Energy Information Administration showed US gasoline stocks rose by 5.4 mln barrels last week.

Brent crude oil future for February delivery was at $74.64 a bbl, as against $76.49 per bbl at the time of the Indian market close the previous day. An uptick in crude oil prices ignites worries of imported inflation.

According to data on the RBI's Negotiated Dealing System--Order Matching platform--the market-wide turnover was 34.60 bln rupees compared with 38.30 bln rupees at 0930 IST on Wednesday. 

During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.23-7.28%. (Nishat Anjum)

India Gilts:Seen up as US ylds fall to 3-mo low; MPC outcome Fri eyed

MUMBAI – Government bond prices are expected to open higher as the 10-year benchmark US Treasury yield fell to a three-month low on Wednesday, but the reaction in the domestic market would be muted ahead of the outcome of the Monetary Policy Committee's meeting on Friday, dealers said.

The yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.21-7.27% today, against 7.25% on Wednesday.

The yield on the benchmark 10-year US Treasury note fell to a three-month low of 4.12% at Wednesday's settlement from 4.20% at the end of Indian market hours on Wednesday. Data from Automatic Data Processing Inc showed that private payrolls in the US rose by 103,000 jobs last month, below forecasts of 130,000 job gains.

Following the private forecaster's data, investors priced in a weak payrolls number from the US government, due to be released on Friday. The November data is expected to show that employers added 180,000 jobs during the month, according to the median estimate of economists polled by Reuters.

Before the reading, traders are wary of the domestic rate-setting panel's decision, even as it is expected to maintain status quo on the repo rate at 6.50% and the policy stance at "withdrawal of accommodation". Over the last two policies, the Reserve Bank of India has sprung negative surprises to tighten liquidity, keeping traders on their toes, dealers said. 

The initial gains may not sustain as investors would be averse to picking up the 10-year bond as its yield falls to near 7.22%, dealers said. With the event risk also looming on Friday, traders may also take the opportunity to book profits and lighten their portfolios.

Foreign banks may continue with their buying spree, after being top net buyers in six of the last seven training sessions, dealers said. A fall in Brent crude for February delivery to under $75 a bbl also provides a positive trigger for gilts, though this too, is unlikely to play out.

Crude futures fell nearly 4% on Wednesday to their lowest level since June, after data from the Energy Information Administration showed US gasoline stocks rose by 5.4 mln barrels last week. The increase in inventory was over five times the 1-mln-barrel rise that analysts had expected. Following the data, US gasoline futures plummeted to their lowest in two years. (Aaryan Khanna)

End

US$1 = 83.35 rupees

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

Edited by Saji George Titus

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2023. All rights reserved.