Posts tagged benchmark 10 year bond
Bond market/ G-Sec update
After a hefty 8 bps points jump on Friday of last week due to decision to free up fuel price (read MB update here), G-sec markets opened the week on a strong note. Announcement by RBI that the borrowing amount for the week will be at the reduced levels kept the sentiments up. Yields on benchmark 10 year bond 7.80% 2020 fell 6 bps to 7.59%.
Following 3 days also witnessed buying and yields fell to 7.52% till Thursday. This was the lowest close on yields since June 9, 2010.
Benchmark bond daily movement
Positive sentiments in the bond market were also enhanced due to the rally in US treasuries. Primary articles’ inflation came in at a lower figure of 14.75% for the week ended 19 June compared to 17.6% for the earlier week. Fuel index also came in lower at 12.9% compared to 13.18% for the earlier week. This also kept the sentiments positive in bond market.
Friday however saw some correction with profit booking coming in at higher levels. Yields on benchmark bond increased 4 bps to 7.56% over Thursday. On a weekly basis, the yields have decreased 10 bps.
Govt sold bonds worth Rs 10,000 cr all which were fully subscribed and yields were at the expected level. Liquidity in the system remained tight with average volumes on Repo window stood at Rs 63,400 cr.
The rate hike of RBI (read MB update here) was announced after market hours and hence the weekly closing yield does not factor in the hike. It is expected that bonds will open on a weaker note on Monday and the sentiments would carry on for the week. Thus yields should trade with a positive bias for next week.
Author: Praveen Bajaj
Govt Securities update:June 26, 2010
For the first 4 days of the week, government securities moved in a range. Benchmark 10 year bond, 7.80% 2020 bond moved in between 7.55% and 7.61%.
Results of buyback of securities, in which RBI accepted amount of Rs 806 cr against a notified amount of Rs 10,000 cr. This led to a slight increase in the yields on Monday.
Outflow of funds for payment of Broadband Wireless Access (BWA) auctions kept liquidity conditions tight. Amount accessed through the Repo window touched a high of Rs 82,915 cr on Thursday and averaged around Rs 70,000 cr per day of the week. Comments from officials that liquidity easing measures to be taken took some pressure off the bond market.
Primary articles’ inflation for the week was at elevated levels at 17.6% compared to 16.86% last week. This again put pressure on the bonds and yields rose in the first half of trade on Thursday.
Rally in US treasuries after the announcement from Federal Reserve that low rates will be retained for an extended period of time kept the sentiments on a bullish side. These mixed sentiments kept the yields in a range.
However on Friday, after the announcement of market linked oil prices, yields jumped to the weekly high of 7.68% (click here for MB update). The benchmark bond closed the week at 7.65%, 9 bps higher than last week’s close of 7.56%.
For the next week, we expect the yields to trade on a bullish side due to inflationary concerns. Liquidity situation might ease but concerns of rate hike due to high inflation will overshadow the ease in liquidity.
Author:Praveen Bajaj
India to move to market movement based oil prices
The Empowered Group of Ministers (EGoM), headed by Finance Minister Pranab Mukherjee, have decided in the meeting just now that India oil prices such as petrol and diesel prices will be determined by market.
Details of the same, as to how this exactly will be carried out will be disclosed later and we will update you on the same.
As of now, diesel prices have been hiked by Rs 2/ liter but eventually they will be market linked.Petrol prices will be hiked by Rs 3.50/liter the same time, LPG prices have been hiked by Rs 35/cylinder and Kerosene prices by Rs 3/litre. New prices will be effective by mid-night today.
Before the meeting it was speculated that EGoM may either decide to raise the prices or may go ahead with Petroleum Minister Murli Deora’s suggestion of oil price decontrol.
The move has been taken to reduce the oil subsidy burden on the Govt. The government has provided only Rs 3,108 crore towards petroleum subsidy in the current year against an estimated fuel subsidy bill for 2010-11 of nearly Rs 90,000 crore at an average crude oil import price—popularly called Indian basket—of $80 a barrel. If the prices of petroleum products were not revised, the huge subsidy bill could easily eat up the bounty the government received from the 3G and broadband auction.
This move of EGoM is likely to affect inflation adversely. Inflation is already at a high level (To read our May inflation update, click here). WPI inflation for the month of May breached the 10% mark coming at 10.16%. Though food articles are largely blamed for high inflation, but fuel index is also catching up fast. This move of EGoM is likely to put more pressure on inflation. However, Oil minister was of the opinion that the hike will have marginal effect on inflation and the hike will be absorbed by the consumer. An increasing inflation will put pressure on RBI to raise policy interest rates (What are policy rates?), may be even before First quarterly review of Monetary Policy towards the end of July.
G-Sec markets experienced selling pressure after the release of news and yields on benchmark 10 year bond, 7.80% 2020 bond rose to touch a high of 7.6368 from the close of 7.5682 yesterday. Towards the end of the day, yields have risen to as high as 7.67%.
Equity markets have taken this as a very positive note for oil marketing companies particularly HPCL and BPCL, which jumped 5.4% and 5.5% respectively from yesterday’s close. HPCL finally ended 13.66% up whereas BPCL ended 12.8% up on Sensex. Overall equity index have been on a negative side since morning and have not shown any significant movement to the news. Sensex was down 0.88% on the close of market.
Author:Praveen Bajaj
Weekly G-Sec update:June19, 2010
High inflation released on Monday set the tone for the week. As expected, with the release of inflation above 10% mark, yields on benchmark 7.80% 2020 bond rose 8 bps to close at 7.69% on Monday under fears that RBI might be forced to raise rates to tame inflation. Rates also rose after comments from Finance Secretary Mr Ashok Chawala that bond issuance schedule will not be postponed which led to buying in bonds.
However, after Monday, we saw buying returning to the bonds as comments from RBI officials said that liquidity easing measures will be taken. RBI bought back bonds worth Rs 8,307 cr against a target of Rs 100 cr announced further buyback of bonds worth Rs 10,000 cr on June 21.
Liquidity condition did ease in the current week. Till last week, liquidity was tight due to 3G spectrum payment and advance tax payment by banks and companies. For the week, average of the combined volumes on 1st and 2nd window of repo stood at Rs 34,855 cr compared to Rs 60,311 cr for the last week.
Going forward, we expect the liquidity conditions to ease but the same will not go back to the levels of Rs 35,000-40,000 cr of surplus due to good credit demand part of which is evidenced by the good credit growth for the fortnight ending June 4, 2010.
All these put yields in a comfortable position and yields closed at 7.56% for the week compared to 7.61% last week, and 13 bps down from highest point of the week.
High inflation has sparked debate of a rate rise by RBI again and market will be very sensitive to comments from RBI and Finance ministry officials. We expect yields to trade with a positive bias for the week.
Author:Praveen Bajaj
Weekly G-Sec update:June 12, 2010
After trading in a range last week, yields on benchmark 10 year bond, 7.80% 2020 bond steadily rose 9 bps for the week to close at 7.61% for the week. Surge in yields was driven by tight liquidity conditions.
On all days of the week, we saw Repo window being active. Daily average of the combined amounts on 1st and 2nd window of Repo stood at Rs 60,311 cr for the week compared to Rs11,800 cr for last week. Tight liquidity conditions are driven by the advance tax payment by corporate.
Concerns of higher inflation have also kept the yields on a higher side. Some media reports cited a Govt official expecting inflation to cross 10% mark for the month of May. Good IIP numbers also added to the pressure.
Govt borrowing is progressing in a phased manner. After Friday’s auction, borrowing worth Rs 125,000 cr has been completed amounting to 27% of the total borrowing. Borrowings amid tight liquidity conditions have kept the yields at elevated levels.
For next week inflation (WPI) will be the most watched factor and a high inflation will lead to a surge in yields.
Author name:Praveen Bajaj
