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India Gilts Review: End tad up as OIS rates fall; MPC outcome eyed

Informist, Tuesday, Feb 7, 2023

 

By Anjali and Kasthuri Akhil

 

MUMBAI/NEW DELHI – Government bond prices ended slightly up tracking a fall in overnight indexed swap rates, dealers said. Meanwhile, traders maintained caution ahead of the central bank's monetary policy decision due Wednesday, which limiting the gains.

 

The 10-year benchmark 7.26%, 2032 bond ended at 99.66 rupees, or 7.31% yield, against 99.59 rupees, or 7.32% on Monday.

 

Traders received fixed rates in overnight indexed swap rates, which contributed to the rise in prices towards the end of gilt market hours. The five-year swap rate hit the day's low of 6.24% at the end of gilt trading hours from 6.27% on Monday. 

 

However, gilts gave up some gains after cutoffs on 10-year state bonds reflected weak demand at the auction, dealers said. The Reserve Bank of India set the cut-off yield on 10-year state bonds in 7.64-7.67% range, as against expectation of 7.60-7.62% yields, according to an Informist poll.

 

"Today only investors were majorly active in the auction which is why the long-term bond cutoffs were good," a dealer at a primary dealership said. "Banks who go for 10-year papers did not place high bids because they were cautious today before the monetary policy decision tomorrow (Wednesday)."

 

Some dealers speculated that the longer-term state bond saw robust demand from insurance companies and Employees' Provident Fund Organisation. Today, 12 states raised 202.50 bln rupees through the sale of bonds at the auction.

 

Traders mostly disregarded overseas cues, as inspite of a rise in US Treasury yields, gilts traded in a thin band in early trade. The impact of the rise in US Treasury yields was limited as traders had already factored in the better part of the rise in US yields on Monday, and the overnight increase wasn't that significant, dealers said. The yield on the benchmark 10-year US Treasury note rose to 3.63% during the day, against 3.58% at the end of gilt trading hours on Monday due to better-than-expected US jobs data. 


Moreover, traders stepped up purchases at the psychologically crucial 7.32% yield level, considered lucrative, on the 7.26%, 2032 bond. This aided gilt prices, dealers said.

 

Ahead of the monetary policy review, market sentiment largely remained positive due to expectations of the rate-hike cycle nearing an end after a final 25-basis-point rate hike on Wednesday. According to an Informist poll, an overwhelming majority of 26 out of 30 respondents expect the Monetary Policy Committee to hike the repo rate by 25 bps. Poll respondents expect this to be the final hike as headline inflation has eased substantially in the last two months. India's annual inflation based on CPI fell to a 12-month low of 5.72% in December, down 207 bps from the peak inflation of 7.79% in April.

 

"There will most likely be a pause after this rate hike, but comments from the Governor will give further clarity on that," a dealer from a state owned bank said. "Apart from value buying at 7.32% on the 2032 bond, traders were mostly sidelined today before Monetary Policy Committee meet. "

 

According to data on the RBI's Negotiated Dealing System–Order Matching platform–the turnover was 262.05 bln rupees, compared with 336.95 bln rupees on Monday.


Meanwhile, no trades were settled with the digital rupee pilot today. On Monday, trades aggregating 400 mln rupees were settled in eight deals.

 

OUTLOOK

On Wednesday, bond prices are seen opening steady as traders may stay on the sidelines ahead of Reserve Bank of India Governor's monetary policy statement at 1000 IST on Wednesday, dealers said.

 

Traders may take cues from overnight movement in US Treasury yields and crude oil prices.

 

The yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.24-7.36%.

 

 

Today

Monday

Price

Yield

Price

Yield

7.26%, 2032

99.65507.3102%99.59007.3197%

7.38%, 2027

100.77007.1681%100.75257.1730%
7.10%, 202999.25257.2489%99.22007.2554%
7.41%, 2036100.35007.3677%100.25507.3788%
7.54%, 2036101.29007.3840%101.20007.3947%

India Gilts: Up as traders step up purchases; MPC meet outcome eyed

 

 1218 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS
7.26%, 2032
PRICE (rupees)99.6899.6899.5199.5299.59
YTM (%)      7.30687.30657.33247.33017.3197

 

MUMBAI–1230 IST–Government bond prices were up as traders stepped up purchases at yields considered lucrative. However, the gains were limited due to caution before the Reserve Bank of India Monetary Policy Committee's meeting outcome on Wednesday, dealers said.

 

"Before the policy, these are the levels we are seeing," a dealer at a state-owned bank said. "Overall market sentiment is quite positive, because of that even the cutoffs at state loan auction is seen better."

 

As all eyes are on the domestic rate-setting panel's decision, the market largely ignored the global cues. The impact of a rise in US Treasury yields and crude oil prices was offset by a positive domestic outlook, dealers said.

 

Back home, the last gilt auction for the financial year ending March on Feb 24 and expectations of the rate-hike cycle coming to an end have contributed to the upbeat sentiment in the market, dealers said. 

 

According to an Informist poll, an overwhelming majority of 26 out of 30 respondents expect the Monetary Policy Committee to hike the repo rate by 25 basis points at the end of its three-day meeting. Poll respondents expect this to be the final hike as headline inflation has eased substantially in the last two months. India's annual inflation based on CPI fell to a 12-month low of 5.72% in December, down 207 bps from the peak inflation of 7.79% in April.

 

With a 25-bps rate hike already factored in by most traders, now market is particularly looking forward to RBI Governor Shaktikanta Das' comments for cues on the central bank's future course of rate hikes, dealers said. 

 

Moreover, traders await the result of the state loan auction where demand was seen firm. Insurance companies were seen bidding for longer-term security, meanwhile, state-owned banks were speculated to be one of the major bidders for 10-year bonds, dealers said. Twelve states planned to raise 202.50 bln rupees through the sale of bonds.

 

According to data on the Reserve Bank of India's Negotiated Dealing System–Order Matching platform–the market-wide turnover was 128.10 bln rupees at 1230 IST, compared with 147.60 bln rupees at 1230 IST on Monday.

 

For rest of the day, the yield on the 10-year benchmark 7.26%, 2032 bond, is seen at 7.28-7.35%. (Nishat Anjum) 


India Gilts: Steady on caution ahead of MPC meet outcome Wed

 

 0940 IST  PRICE HIGH  PRICE LOW       OPEN    PREVIOUS
7.26%, 2032
PRICE (rupees)99.6199.6499.5199.5299.59
YTM (%)      7.31687.31247.33247.33017.3197

 

NEW DELHI–0940 IST–Prices of government bonds were steady as traders avoided placing large bets on caution ahead of the outcome of the three-day meeting of the Reserve Bank of India's Monetary Policy Committee, due Wednesday. Traders await comments from RBI Governor Shaktikanta Das for cues on the central bank's future course of rate hikes, dealers said. 

 

The impact of the rise in US Treasury yields was limited unlike on Monday, as traders stepped up purchases at the key 7.32% yield level, considered lucrative, on the 7.26%, 2032 bond. Yield on the benchmark 10-year US Treasury note rose to 3.63%, against 3.58% at the end of gilt trading hours on Monday due to better-than-expected US jobs data. 

 

"We are too close to the policy and traders are expected to buy at 7.32-33% levels, just like yesterday (Monday)," a dealer at a primary dealership said. "The US yields have risen by only few basis points from yesterday's (Monday) closing." 

 

According to an Informist poll, 26 out of 30 respondents expect the Monetary Policy Committee to hike the repo rate by 25 bps, while four respondents see the policy rate being left unchanged.

 

Moreover, few traders were on the sidelines ahead of state loan auction. Today, 12 states will look to raise 202.50 bln rupees through the sale of bonds from 1030 IST to 1130 IST.

 

According to data on the Reserve Bank of India's Negotiated Dealing System–Order Matching platform–the market-wide turnover was 25.25 bln rupees at 0930 IST, compared with 61.00 bln rupees at 0930 IST on Monday.

 

During the day, the yield on the 10-year benchmark 7.26%, 2032 bond, is seen at 7.28-7.35%. (Anjali) 


India Gilts: May fall tracking rise in US ylds; MPC meet decsion eyed

 

MUMBAI – Prices of government bonds are seen opening lower today tracking an overnight rise in US Treasury yields. Traders may maintain caution amid a lack of domestic cues, as they await the Reserve Bank of India's monetary policy decision, due on Wednesday, dealers said.

 

Today, the yield on the 10-year benchmark 7.26%, 2032 bond is seen at 7.28-7.35% as against 7.32% on Monday.

 

Yield on the benchmark 10-year US Treasury note hit a four-week high of 3.63%, against 3.58% at the end of gilt trading hours on Monday as US non-farm-payrolls data shocked market participants. The unusually high 517,000 new jobs added in January dimmed hopes of the US Federal Reserve stopping with rate hikes anytime soon.

 

Losses may be limited as investors are likely to step up purchases on the 2032 gilt if its yield hits the 7.35% mark. Even if the 10-year benchmark tops the psychologically crucial level, the movement is not expected to sustain and the market's appetite will keep yields in check, dealers said.

 

Moreover, some traders may keep to the sidelines ahead of the auction of state government securities, dealers said. Today 12 states will look to raise 202.50 bln rupees through the sale of bonds from 1030 IST to 1130 IST.

 

Today, traders are by and large expected to exercise caution ahead of the outcome of the Monetary Policy Committee's three-day meeting, due Wednesday, dealers said. With a 25-bps rate hike already factored in by most traders, now market is particularly looking forward to RBI Governor Shaktikanta Das' comments for cues on the central bank's future course of rate hikes, dealers said. 

 

According to an Informist poll, 26 out of 30 respondents expect the Monetary Policy Committee to hike the repo rate by 25 bps, while four respondents see the policy rate being left unchanged.(Kasthuri Akhil)

End

 

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

 

Edited by Tanima Banerjee

 

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.

 

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