Informist, Tuesday, Jun 6, 2023

By Kasthuri Akhil

MUMBAI – Prices of government bonds ended higher today tracking a fall in US Treasury yields. Trade volume remained low as traders refrained from placing large bets ahead of the Reserve Bank of India's monetary policy decision on Thursday, dealers said.

The 10-year benchmark 7.26%, 2033 bond ended at 101.95 rupees, or 6.98% yield, against 101.82 rupees, or 7.00% yield on Monday.

"Some buying was definitely there in the last one-and-a-half hour as volumes also picked up, but there was no specific reason for that," a dealer at a private bank said. "People were just taking positions before the MPC."

During the day, some traders covered their short bets on the 10-year benchmark paper. However, the rise in prices was limited as they exercised caution ahead of the MPC meeting's outcome, which kept the yield on the 2033 paper above 6.97%, dealers said.

In an Informist poll, 29 of the 30 respondents said they expect the domestic rate-setting panel to keep the repo rate unchanged at 6.50%. 

In April, the committee had unanimously decided to keep the policy repo rate unchanged at 6.50%. It also decided by a majority of five out of six to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.
 

Traders also look forward to the decision on policy stance to gain insight into the future rate trajectory. Some dealers said that the panel is expected to keep the stance unchanged as liquidity is still the same as April. In addition to that, a change in stance to neutral would make it difficult for the central bank to hike rates again.

Dealers said that traders will continue to position themselves for the MPC decision on Wednesday as well, as the domestic market lacks any other strong cues to place bets on.

"Today, there should be some positional buying by banks," a dealer at a state-owned bank said. "Those who were looking at 7.02-7.03% yield level (on the 7.26%, 2033 bond) started taking positions at the current level only."

Meanwhile, the yield on the benchmark 10-year US Treasury note fell to 3.68% towards the end of Indian market hours from 3.76% at Indian market's close on Monday. 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 as data showed new orders slowed in May as the prices businesses pay for inputs fell to a three-year low, suggesting the Federal Reserve's efforts to curb high inflation to cool the economy might be working.

Over 75% of market participants now expect the Fed to keep rates unchanged at 5.00-5.25% at its policy meet on Jun 13-14, according to the CME group's FedWatch tool.

According to data on RBI's Negotiated Dealing System-Order Matching platform, the turnover today was 314.15 bln rupees, compared with 413.80 bln rupees on Monday. Meanwhile, trades aggregating 450 mln rupees were settled in seven deals with the digital rupee today, as against 250 mln rupees settled in five deals on Monday.

OUTLOOK

Gilts are seen opening steady on Wednesday due to caution ahead of the MPC meeting's outcome Thursday, 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 6.94-7.02%.

India Gilts: Remain up; volume low ahead of MPC meet outcome Thu

MUMBAI--1500 IST--Prices of government bonds remained up as US Treasury yields fell further during the day. Trade volume remained low as traders awaited the Reserve Bank of India's monetary policy decision on Thursday, dealers said.

"You can't call the rise in 10-year (7.26%, 2033) paper as buying momentum in the market, given the low volumes," a dealer at a state-owned bank said. "If and only the yield goes above 6.98%, that genuine buying would come in."

Some traders covered their short bets on caution ahead of the MPC meeting's outcome. However, the yield on the 10-year benchmark 2033 bond is expected to remain above 6.97% for the rest of the day, dealers said.

In a poll by Informist, an overwhelming majority of 29 of the 30 respondents said they expect the domestic rate-setting panel to keep the repo rate unchanged at 6.50%. 

In April, the committee had unanimously decided to keep the policy repo rate unchanged at 6.50%. It also decided by a majority of five out of six to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.
 

Traders look forward to the decision on policy stance. Some dealers said that the panel is expected to keep the stance unchanged as liquidity is still the same as in April. In addition to that, a change in stance to neutral would make it difficult for the central bank to hike rates again.

Meanwhile, the yield on the benchmark 10-year US Treasury note fell to 3.70% in early trade from 3.76% at the end of Indian market hours on Monday. The yield was further down 4 basis points at 3.66%. 

US yields fell as data showed new orders slowed in May as the prices businesses pay for inputs fell to a three-year low, suggesting the Federal Reserve's efforts to curb high inflation to cool the economy might be working.

According to data on the Reserve Bank of India's Negotiated Dealing System--Order Matching platform--the market-wide turnover was at 188.80 bln rupees at 1500 IST, compared with 293.30 bln rupees at 1510 IST on Monday.

For the rest of the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.97-7.00%. (Kasthuri Akhil)

India Gilts: Remain up; trade thin ahead of MPC meet outcome

MUMBAI--1210 IST—-Prices of government bonds remained up, tracking a fall in US Treasury yields. Traders avoided placing large bets as they awaited the outcome of the Reserve Bank of India Monetary Policy Committee's meeting on Thursday, dealers said.

"Whoever had to position before the MPC has already done that. So it is going to be a dull day today," a dealer at a private bank said. "There's not much volume too, MPC will only give some direction to the market."

Prices moved in a narrow range after some traders sold their bond holdings following the rise in prices in early trade. During the day, traders expect the yield on the 10-year benchmark 7.26%, 2033 bond to stay above 6.98% as traders have no strong cues in the domestic market until the MPC's decision, dealers said.

Meanwhile, the yield on the benchmark 10-year US Treasury note fell to 3.68% from 3.76% at the end of Indian market hours on Monday. US Treasury yields fell after data showed new orders slowed in May as the prices businesses pay for inputs fell to a three-year low, suggesting the US Federal Reserve's efforts to curb high inflation to cool the economy might be working.

According to data on the Reserve Bank of India's Negotiated Dealing System--Order Matching platform--the marketwide turnover was 77.20 bln rupees at 1205 IST, compared with 178.95 bln rupees at 1205 IST on Monday.

For the rest of the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.98-7.02%. (Kasthuri Akhil)

India Gilts: Up as US yields fall; MPC meeting outcome eyed 

NEW DELHI--0915 IST--Government bonds rose, tracking an overnight fall in US Treasury yields. The rise was, however, capped as traders refrained from placing large bets due to caution ahead of the outcome of the Monetary Policy Committee's meeting, due on Thursday.

Yields on US Treasury notes with tenure below 10 years fell on Monday after data showed new orders slowed in May as the prices businesses pay for inputs fell to a three-year low, suggesting the US Federal Reserve's efforts to curb high inflation to cool the economy might be working. Yields on long-term Treasury notes remained largely unchanged. 

The yield on the benchmark 10-year US Treasury note fell to 3.70% in Asian trade today from 3.76% at the close of Indian markets on Monday. 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 the domestic front, traders await the Monetary Policy Committee's policy review decision at the end of its three-day meeting on Thursday. The market widely expects the domestic rate-setting panel to keep the repo rate unchanged at 6.50%, dealers said. 

"The pause is already priced in by the market, all we need to look at is commentary," a dealer at a state-owned bank said. "The inflation estimate and growth for the year will be important." 

Following the 18-month low CPI inflation print in April, some analysts expect the central bank to lower its inflation forecast for 2023-24 (Apr-Mar). In its April policy review, the Reserve Bank of India had projected CPI at 5.2% for 2023-24.

According to data on the RBI's Negotiated Dealing System--Order Matching platform--the marketwide turnover was 17.65 bln rupees at 0915 IST, compared with 67.60 bln rupees at 0925 IST on Thursday.

During the day, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.95-7.03%. (Anjali)

India Gilts: Seen up as US ylds fall; mkt awaits MPC meet outcome Thu

MUMBAI – Prices of government bonds are seen opening slightly higher, tracking a fall in US Treasury yields, dealers said. However, traders may refrain from placing aggressive bets during the day due to caution ahead of the Monetary Policy Committee's three-day meeting, starting today.

Today, the yield on the 10-year benchmark 7.26%, 2033 bond is seen at 6.96-7.03% as against 7.00% on Monday.

The yield on the benchmark 10-year US Treasury note fell to 3.70% in Asian trade today from 3.76% at the close of Indian markets on Monday. 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 of tenures below 10 years fell on Monday after data showed new orders slowed in May as the prices businesses pay for inputs fell to a three-year low, suggesting the US Federal Reserve's efforts to curb high inflation to cool the economy might be working. Yields on long-term Treasury notes remained largely unchanged. 

On the domestic front, the market awaits the Monetary Policy Committee's policy review decision, dealers said. In a poll by Informist, an overwhelming majority of 29 of the 30 respondents said they expect the domestic rate-setting panel to keep the repo rate unchanged at 6.50% at the end of its three-day meeting on Thursday.

The market eyes the panel's policy stance decision as well, as it may give insight into the future rate trajectory, dealers said. Traders remained divided about the prospects of the committee retaining its stance in its policy decision on Thursday, dealers said. The panel had kept the policy stance unchanged at "withdrawal of accomodation" in its April policy review.

During the day, prices of government bonds may remain in a narrow range due to caution ahead of the domestic rate-setting panel's review outcome, dealers said. However, some traders may cover their short bets ahead of the committee's meeting outcome. (Nishat Anjum)

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.

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

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