Informist, Friday, May 26, 2023

By Kasthuri Akhil

MUMBAI – Government bonds recovered most losses as traders stepped up purchases after slightly higher-than-expected cut-offs at the 310-bln-rupee auction. However, prices were little changed as some traders sold their bond holdings at a profit, which prevented any further rise, dealers said.

The 10-year benchmark 7.26%, 2033 bond ended at 101.74 rupees, or 7.01% yield, against 101.75 rupees, or 7.01% yield on Thursday. 

Despite firm demand at the auction, prices moved within a narrow range in the latter half of the day. "Nobody was going gung-ho in the bidding today. Most usual suspects were there in the 2062 paper, so it finally added up to adequate demand for the paper," a dealer at a private bank said. "No particular investor had huge demand, can't say people were very bullish today."

At the auction today, insurance companies likely bid for the 7.41%, 2036 paper along with the 7.40%, 2062 bond. Moreover, state-owned banks bid aggressively for both the 7.17%, 2030 and 2036 papers, dealers speculated. Typically, state-owned banks keep the 7-year paper in their held-till-maturity portfolio.

Moreover, private banks likely stocked up on the 2030 paper as the yield on the bond was on a par with the 7% yield on the 10-year benchmark 2033 bond, which is considered lucrative, dealers said.

The Reserve Bank of India set the cut-off price at 100.88 rupees on the 2030 bond, 102.75 rupees on the 2036 bond, and 103.02 rupees on the 2062 bond. The cut-off price was expected at 100.85 rupees on the 2030 bond, 102.66 rupees on the 2036 bond, and 103.13 rupees on the long-term paper, in an Informist poll. 

"Despite better cutoffs, market traded still very dull. Whatever they had to bid for, they got that stock and then there was nothing more to it," a dealer at another private bank said. "Our market is also quite decoupled with US yields, only if US yield moves substantially, we could see some reaction."

Traders in the domestic market refrained from placing aggressive bets on the basis of US Treasury yield movement due to the ongoing uncertainty around the US debt ceiling. The market awaits further clarity on the US debt ceiling negotiations as the deadline of its payment obligations draws closer, dealers said.

In early trade, prices were down due to an overnight rise in US Treasury yields. The 10-year US Treasury bond yield rose 4 basis points to 3.81% from Indian market close on Thursday after jobless claims data showed signs of persistence in the US labor market.

Initial claims for state unemployment benefits in the past two weeks were revised down by a combined 50,000 as fraud claims were sorted out. In the recent week, the jobless benefit claims increased by 4000 to 229,000.

Moreover, upward revision of US GDP data for Jan-Mar pointed at the fact that the world's largest economy remained resilient in the face of high-interest rates, which fuelled fears of another rate hike by the US Federal Reserve in its upcoming review meeting on Jun 13-14.

According to the CME FedWatch tool, about 59% of Fed fund futures traders expect the Fed to keep rates unchanged. The rest see a 25-basis-point hike in June.

According to data on the RBI's Negotiated Dealing System--Order Matching platform, the turnover was 485.75 bln rupees compared with 324.90 bln rupees on Thursday. Meanwhile, trades aggregating 400 mln rupees were settled in six deals with the digital rupee today, as against 300 mln rupees settled in four deals on Thursday. 

OUTLOOK

Gilts are not traded on Saturdays

On Monday, bonds are seen opening steady due to a lack of significant domestic cues, dealers said.

Traders may track overnight movement in US Treasury yields and crude oil prices.

The yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.97-7.05%.

India Gilts: Tad up as traders stock up after firm demand at auction

NEW DELHI--1350 IST--Government bonds were a tad up due to firm demand at 310-bln-rupee auction, dealers said. Some traders sold their bond holdings at a profit after a rise in prices, which capped gains.

Prices fell in the early trade tracking an overnight rise in US Treasury yields, dealers said. 

"The yield started correcting themselves from the bidding period only," a dealer at a state-owned bank said. "The demand from nationalised banks (state-owned banks) was there in both 7-year (7.17%,2030 bond) and 14-year (7.41%,2036 bond)." 

Dealers speculated that private banks and state-owned banks stocked up on 7.17%, 2030 paper as the yield on the bond was on a par with the benchmark 7.26%, 2033 bond, considered lucrative, dealers said. Typically, state-owned banks keep the 7-year paper in their held-till-maturity portfolio, dealers said. 

Some traders covered their short bets for 7.14%, 2036 bond, dealers said. Moreover, dealers speculated that insurance companies bid for the 7.40%, 2062 paper. 

The Reserve Bank of India set the cutoff on 7.41%, 2036 bond at 102.75 rupees, on 7.17%, 2030 bond at 100.88 rupees, and on 7.40%, 2062 bond at 103.02 rupees.   

According to data on the RBI's Negotiated Dealing System--Order Matching platform--the market-wide turnover was 248.85 bln rupees at 1350 IST, compared with 246.90 bln rupees as of 1445 IST on Thursday.

For the rest of the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.97-7.03%. (Anjali)

India Gilts: Recover early losses; firm demand seen at gilts auction

MUMBAI--1155 IST--Government bonds recovered early losses as traders expected firm demand at the 310-bln-rupee gilt auction. An overnight rise in US Treasury yields capped gains, dealers said.

"There was some short covering in the 2036 (7.41%, 2036) paper. Earlier we expected a tail on that paper, but there seems to be a good demand from PSUs (state-owned banks) in that segment too," a dealer at a state-owned bank said.

Tail is the difference between the bid price of the gilts at the auction and the secondary market price.

The government is looking to raise 70 bln rupees through the issuance of the 7.17%, 2030 bond; 120 bln rupees of the 7.41%, 2036 bond; and 120 bln rupees of the 7.40%, 2062 bond at the auction from 1030 IST to 1130 IST. 

Dealers speculated that state-owned banks have bid aggressively for the three papers at the auction. 2030 is a favoured paper at the auction as its yield is almost at similar levels as the 10-year benchmark 7.26%, 2033 bond. The yield on the bond is close to 7.0%, which is considered a good buying level for traders, dealers said.

Moreover, insurance companies and pension funds are also speculated to have participated in the auction for the 2062 paper.

Prices were down earlier due to an overnight rise in US Treasury yields, dealers said. The yield on the 10-year US Treasury note rose to 3.83% from 3.77% at the end of Indian market hours on Thursday. 

The yield on the benchmark 10-year US Treasury notes rose on Thursday as traders hoped a resolution over the debt ceiling issue was possible soon after US House Speaker Kevin McCarthy said some progress has been made. 

According to data on the RBI's Negotiated Dealing System--Order Matching platform--the market-wide turnover was 132.10 bln rupees at 1155 IST, compared with 143.95 bln rupees as of 1215 IST on Thursday.

For the rest of the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.98-7.04%. (Kasthuri Akhil)

India Gilts: Fall; traders avoid aggressive bets ahead of auction

MUMBAI--0919 IST--Government bond prices were a tad down, tracking a rise in US Treasury yields. However, traders remained on the sidelines ahead of the 310-bln-rupee gilt auction, keeping the price movement in a narrow range after the initial fall.

The government will sell 70 bln rupees of the 7.17%, 2030 bond; 120 bln rupees of the 7.41%, 2036 bond; and 120 bln rupees of the 7.40%, 2062 bond at the auction from 1030 IST to 1130 IST. 

"It's a very usual market today. Shorter-term papers doesn't seem to have interest, so there are hardly any bids there," a dealer at a primary dealership said. "In the long-term paper, the movement seems okay, given the rise in US yields."

Yield on the benchmark 10-year US Treasury notes rose on Thursday as traders hoped a resolution over the debt ceiling issue was possible soon after US House Speaker Kevin McCarthy said some progress has been made. 

President Joe Biden and McCarthy seemed to be nearing an agreement over raising the US government's borrowing limit before Jun 1, when the world's largest economy has to make payments on its debt.

The yield on the 10-year US Treasury note rose to 3.83% from 3.77% at the end of Indian market hours on Thursday. 

According to data on the Reserve Bank of India's Negotiated Dealing System--Order Matching platform--the marketwide turnover was 26.75 bln rupees at 0920 IST compared with 44.25 bln rupees at 0930 IST on Thursday.

During the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.98-7.04%. (Nishat Anjum)

India Gilts: Seen down as US ylds rise, short bets ahead of auction

NEW DELHI - Prices of government bonds are seen opening lower today tracking an overnight rise in US Treasury yields. Traders may place short bets ahead of the 310 bln rupees auction, which may further weigh on gilts, dealers said. 

The government will sell 70 bln rupees of the 7.17%, 2030 bond, 120 bln rupees of the 7.41%, 2036 bond, and 120 bln rupees of the 7.40%, 2062 bond at the auction. 

However, the losses might be limited due to persistent demand for the 10-year benchmark 2033 bond at yield levels near 7.00%, dealers said. 

Yield on the benchmark 10-year US Treasury notes rose on Thursday as traders hoped a resolution over the debt ceiling issue was possible soon after top Congressional leader Kevin McCarthy said some progress has been made. President Joe Biden and McCarthy seemed to be nearing an agreement over raising the US government's borrowing limit before Jun 1 when the world's largest economy has to make payments on its debt. Further, McCarthy was reported as saying he would work over the weekend to hammer out a deal. 

The yield on the 10-year US Treasury note rose to 3.83% from 3.77% at the end of Indian market hours on Thursday. 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.

An upward revision of US GDP data and decline in jobless benefit claims pointed at the fact that the US economy remained resilient in the face of high interest rates that fuelled fears of another rate hike by the Federal Reserve in its upcoming review meeting on Jun 13-14. 

US GDP grew 1.3% in Jan-Mar than 1.1% earlier as reported by the Commerce Department on Thursday. Data from the US Labor Department showed initial claims for state unemployment benefits in the past two weeks through May 13 were revised down by a combined 50,000 as fraud claims were sorted out. (Anjali)

End

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

Edited by Akul Nishant Akhoury

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