Lower-than-expected revenue loss from the GST rate rationalisation and some scope for interest rate cut could be favourable factors
FIIs pulled $1.06 billion from Indian debt in June amid global risks and narrowing yield spreads, though short-term bond picks hint at selective optimism.
The recent slowdown was a “mid-cycle correction”, and the central bank’s policy support has laid the groundwork for growth to return to its long-term trend, Manish Banthia, chief investment officer of fixed-income at ICICI Prudential AMC said.
Disappointing demand at sales of 20-year and 40-year bonds late last month exposed investor concern about a lack of appetite for longer tenors, sending a fresh warning to the government that it may need to rethink issuance plans.
Experts believe a mix of global and domestic factors have triggered the sharp reversal in the FII sentiment, and one of them is a steep rise in bond yields globally, particularly in the United States and Japan.
India's retail inflation slowed to 3.16 percent in April from 3.34 percent in March. It is the lowest year-on-year inflation since July 2019, the government said in a statement.
The yield on 10-year benchmark 6.79 percent 2034 opened at 6.431 percent, as compared to 6.398 percent at previous close.
Usually, when the global tension rises, bond yields react negatively and rise, but this time due to better economic conditions and huge demand from domestic and foreign investors, it remained range bound.
There is potential for mark-to-market gains as interest rates begin to decline and spreads narrow over time
According to the Bloomberg data, the 10-year benchmark bond 7.10 percent 2034 were at 6.727 percent on December 5, as compared to 6.849 percent on November 28.
The bond market is warning against exuberance as the dollar rises
Recent developments have made fixed income investors anxious about the market outlook. But the structural shift forecast for the bond market is not at risk
SEBI had said in a release that companies may issue debt security or non-convertible redeemable preference shares on private placement basis with a face value of Rs 10,000.
Since April, the yield on government securities fell around 10-15 basis points due to multiple factors , like the easing inflation print, Brent crude oil prices, and the higher dividend transfer announced by the Reserve Bank of India.
The MPC has kept the repo rate unchanged at 6.5 percent in the past four monetary policy reviews, after raising the rate by 250 basis points since May 2022.
The yield on corporate bonds across maturities rose 8-18 basis points during the month.
Analysts said Indian stock markets are bearish due to falling oil prices, rising US bond yields, diplomatic efforts in the Middle East, and foreign investors selling. Inflation and recession concerns persist.
Nobody seems to be actually selling and, at the same time, nobody wants to buy big quantities ahead of the general elections. It is a stalemate situation for now
The market expert expects benchmark 10-year bond yields to hover between 7.20 percent and 7.45 percent.
Soon after the announcement by the RBI, yield on the 10-year benchmark government bond started rising. In the morning trade it rose 7-8 basis points and later, in the afternoon trade, it rose by 15 bps.
Bidding for these bonds will take place on the electronic bidding platform of BSE and the National Stock Exchange of India.
JPMorgan Chase & Co. will add Indian government bonds to its benchmark emerging-market index (GBI-EM) starting June 28, 2024
Inclusion in this global benchmark is a major win for India, as it attracts a significant pool of global capital for bond allocations, leading to increased foreign exchange inflows.
Data shows that issuances in August were the lowest since October 2022, when companies and banks raised Rs 46,000 crore through corporate bonds.
Traders are anticipating PMI releases from various countries and the NFPR report on Friday. The market seems to be trading within a range as everyone awaits the upcoming US and India GDP data later in the week.