Informist, Monday, Nov 6, 2023

By Nishat Anjum

MUMBAI – Prices of government bonds ended higher today tracking a fall in US Treasury yields, dealers said. The gains were, however, limited as some traders sold their bond holdings at a profit, which weighed on gilts. The 10-year benchmark 7.18%, 2033 bond closed at 99.11 rupees, or 7.31% yield, against 99.06 rupees, or 7.31% yield, on Friday.

After the initial rise, bonds moved in a narrow range as the market lacked significant domestic cues, dealers said. Throughout the day, there was a lack of strong buying and selling momentum, which kept the market lacklustre.

"US yields are moving so rapidly that one can't use logic about it. Traders are scared of taking even overnight positions," a dealer at a state-owned bank said. "If I buy in the morning, I will book profit at the end of the day."

The trade volume also remained concentrated in the benchmark 10- and 14-year papers. Traders who bought at 7.36-7.37% levels on the benchmark 7.18%, 2033 bond booked profits at around 7.29% yield level, dealers said. The buying momentum remained low as traders awaited the yield on the 10-year benchmark to touch the psychologically crucial level of 7.28%.

Despite the yield on the US 10-year benchmark US Treasury note falling to a five-week low, a lingering fear of open-market operations sales by the Reserve Bank of India weighed on government bonds.

Even as the market does not expect any open-market operations sale auction announcement by the central bank this week, the continuous selling of gilts by the RBI in the secondary market worried a section of the market, dealers said. However, most traders largely expect that the RBI will explicitly announce the open-market operations-sales auction, even if it sells actively in the second market. The RBI sold gilts worth 94.55 bln rupees in October.  

The yield on the benchmark 10-year US Treasury note fell to 4.58%, from 4.64% at close of Indian markets on Friday. The yield fell to a five-week low on Friday after data showed jobs in the US grew slower than expected in October. 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. 

"The way in which US Treasury yields went up, we didn't have that kind of pressure in our market when US yields touched 5% (on the 10-year bond)," a dealer at a primary dealership said. "If there is a movement of 15-20 basis points we have an impact of 2-3 bps."
 

US Labor Department data showed that non-farm payrolls in the US rose by 150,000 jobs in October, lower than economists' expectations of a 180,000 rise. Data for September was also revised lower to 297,000 new jobs instead of 336,000 as earlier reported. Additionally, the two-year yield reached the lowest level on Friday since early September.

On Wednesday, after the outcome of the US Federal Open Market Committee's policy meeting, Federal Reserve Chair Jerome Powell said that if high yields persist, the central bank might not need to raise rates further. Such elevated yields could independently slow the economy and reduce inflation without the Fed having to increase rates again. Moreover, on Friday, Richmond Fed President Thomas Barkin said that weaker jobs data is helping central bankers who are trying to lower inflation.

According to the CME FedWatch tool, there is now only a 9.8% chance of the US Federal Reserve raising its benchmark rates in December, down from 20% on Thursday.

According to data on the RBI's Negotiated Dealing System-Order Matching platform, the turnover was 334.75 bln rupees, compared with 375.85 bln rupees on Friday. There were two trades using the wholesale digital rupee pilot today worth 200 mln rupees, same as the previous day.

OUTLOOK

On Tuesday, gilts may open steady as traders may avoid aggressive bets on 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 7.27-7.34%.

India Gilts: Remain up; market lacks significant domestic cues

MUMBAI--1531 IST--Prices of government bonds remained up following a fall in the 10-year benchmark US Treasury note from the time the Indian market closed on Friday, dealers said. However, they moved in a narrow range after a rise in initial trade, as the market remains devoid of firm domestic cues. 

In the near term, the yield on the benchmark 10-year paper may move in the wide range of 7.25-7.30%, dealers said. "The market has already taken enough of a long position to the point where they don't want it to move any further," a dealer at a private bank said. "If the prices go higher, some selling will keep coming at those levels up to 7.25%."

The volumes in the market remained muted and there was no active buying and selling momentum in the market, dealers said. Some traders who bought 7.18%, 2033 paper at 7.35-7.37% yield levels, sold their bonds at a profit, which weighed on the bonds.

Meanwhile, in short-term bonds, volumes were low, as it has been the case in last few weeks. Volumes in the benchmark 7.06%, 2028 bond have remained muted over the last few weeks, dealers said. However, this may change in the following month with two bond redemptions lined up towards the end of the month. 

The 8.83%, 2023 bond will mature on Nov 25 with its outstanding value at 565.73 bln rupees, and the 4.56%, 2023 bond matures on Nov 29 with the bond holding an outstanding of 325 bln rupees. Short-term bonds are expected to be in favour with regard to reinvestment due to lucrative yields for investors, dealers said.

Moreover, the yield on the benchmark 10-year US Treasury note fell to 4.60%, compared with 4.64% at the time Indian markets close on Friday. The yield on the 10-year US Treasury note fell to a five-week low on Friday post the US jobs data, which showed that jobs grew slower than expected in October.

Despite the yield on the US 10-year benchmark US Treasury note falling to a five-week low, the gains on gilts were limited as traders refrained from placing aggressive bets amid a lingering fear of open-market operations-sales by the Reserve Bank of India.

Going forward, the market may keep a close eye on the state elections lined up this month and the next, dealers said. "States have started to increase their capital expenditure, for which they have started to borrow more than before," a dealer at another private bank said. "The difference between the auction quantums and calendar quantums shows the states' need."

The RBI said 13 states will look to raise 257.50 bln rupees on Tuesday. The amount is higher than 216 bln rupees notified in the indicative calendar for Oct-Dec.

According to data on the RBI's Negotiated Dealing System--Order Matching platform--the market-wide turnover was 256.50 bln rupees at 1531 IST, compared with 306.75 bln rupees at 1530 IST on Friday.

For the rest of the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.28-7.32%. (M.C. Adhiinthran)

India Gilts: Remain higher tracking fall in 10-year US yield

MUMBAI--1251 IST--The prices of government bonds were higher but traded in a narrow range after a rise in initial trade. Bonds rose following a fall in the 10-year benchmark US Treasury note from the time the Indian market closed on Friday, dealers said.
 

The volume in the market remained dull and there was no active buying and selling momentum in the market, dealers said. Traders who bought at 7.36-7.37% levels on the 10-year benchmark, 7.18%, 2033 bond booked profits at 7.29% yield level. The buying momentum remained low as traders await the yield on the 10-year benchmark to touch the crucial level of 7.28%.

"If the market reaches 7.28% (on the 10-year paper), it will fall all the way to 7.25%", a dealer at a state-owned bank said. "But if it holds above that level, then it is likely that yields will rise again to 7.30% level."

Despite the yield on the US 10-year benchmark US Treasury note falling to a five-week low, the gains on gilts were limited as traders refrained from placing aggressive bets amid a lingering fear of open-market operations-sales by the Reserve Bank of India.

Even as the market does not expect any OMO sale auction by the central bank this week, the continuous selling of gilts by the RBI in the secondary market worried a section of the market, dealers said. However, most traders largely expect that the RBI will explicitly announce the OMO-sales auction, even if it sells actively in the second market. 

"The RBI will not play hide and seek, the governor will nail his colours firmly to the mast by explicitly announcing the OMO-sales," a dealer at another state-owned bank said.

In addition, going forward, the demand for short-term papers may pick up as banks will have more cash to deploy due to redemption of two bond papers that are lined up at the end of November, dealers said. The 8.83%, 2023 bond worth 565.72 bln rupees is lined up for redemption on Nov 25. In addition, the 4.56%, 2033 bond worth 325.00 bln rupees is lined up for redemption on Nov 29.

Meanwhile, the yield on the benchmark 10-year US Treasury note fell to 4.58% in early trade, as compared with 4.64% at the time Indian markets close on Friday. The yield on the 10-year US Treasury note fell to a five-week low on Friday post the US jobs data, which showed that jobs grew slower than expected in October.

According to data on the RBI's Negotiated Dealing System--Order Matching platform--the market-wide turnover was 136.55 bln rupees at 1252 IST, compared with 142.65 bln rupees at 1230 IST on Friday.

During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.28-7.32%. (Anupreksha Jain)

India Gilts: Up as US yields fall; traders avoid aggressive bets

MUMBAI--0930 IST--Prices of government bonds rose today, tracking a fall in US Treasury yields, dealers said. However, gains in gilt prices were limited as traders avoided placing aggressive bets in the absence of significant domestic cues.

Gilts tracked the US Treasury yields, but the movement was not as sharp because of a lack of positive news back home, dealers said. "If the US yield falls below 4.50% (on the benchmark 10-year US Treasury note), and we track that kind of movement, then the RBI (Reserve Bank of India) may up the quantum of OMO (open market operation) sales it's been doing in secondary market," a dealer at a private bank said.

The market now thinks that the central bank may continue to sell gilts via OMOs in the secondary market, rather than auctions, dealers said. The RBI sold gilts worth 94.55 bln rupees in the month of October. 

Despite no immediate negative cues, the market did not see any buying momentum, dealers said.

Meanwhile, yield on the benchmark 10-year US Treasury note fell to 4.58% in early trade, as compared to 4.64% at the time of Indian markets close on Friday. The yield on the 10-year US Treasury note fell to a five-week low on Friday post the US jobs data, which showed that jobs grew slower than expected in October.

The trade volume remained unimpressive and concentrated in the benchmark 10- and 14-year papers. According to data on the RBI's Negotiated Dealing System--Order Matching platform--the market-wide turnover was 32.35 bln rupees at 0931 IST, compared with 27.10 bln rupees at 0930 IST on Friday.

During the day, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.28-7.32%.  (Nishat Anjum)

India Gilts: Seen opening higher as US yields fall to 5-week low Fri

MUMBAI – Prices of government bonds are expected to open higher today because of a fall in US Treasury yields, dealers said. Yield on the 10-year benchmark US Treasury note fell to a five-week low as non-farm payroll data was below market expectations, which underscored views that the US Federal Reserve may not raise interest rates further.

Yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.28-7.33% today, as against 7.31% on Friday.

US labor department data, released on Friday after Indian market hours, showed that non-farm payrolls in the country rose by 150,000 in October, lower than economists' expectations of a 180,000 rise.

Yield on the benchmark US 10-year note fell to 4.59% in Asian trade today, from 4.64% at the time of Indian markets close on Friday. 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.

On Friday, the benchmark two-year US yield also reached its lowest levels since early September.

On Wednesday, Fed Chair Jerome Powell said that if high yields persist, the central bank might not need to raise rates further. Such elevated yields could independently slow the economy and reduce inflation, without the Fed having to increase rates again.

During the day, traders may closely track global cues as the market may remain devoid of significant domestic cues, dealers said. Fears of open market operation sales that kept the gains limited on bonds last week have subsided, they added.

However, traders may prefer to stay cautious as they think the Reserve Bank of India may sell heavily in the secondary market. The central bank sold gilts worth 94.55 bln rupees in the month of October.  (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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