Trading volumes in govt bonds jumps 200%
Trading volumes in govt bonds jumps 200%
Trading volumes in the government securities market has jumped by 200 per cent since the beginning of the new financial year as investors see value in the paper which also helped the yields softening from a high of 9.1 per cent. Earlier this month the yield on the 10-year benchmark government bond breached 9 per cent, which attracted buyers.
According to data from Clearing Corporation of India Limited (CCIL) the trading volume of government bonds grew by nearly 200 per cent to Rs 40,240.46 crore on April 11 from Rs 13,459.03 crore on April 2. While the trading volume in the 10-year benchmark government bond rose to Rs 24,170.13 crore on April 11 from Rs 6,771 crore on April 2 recording a growth of almost 260 per cent.
ALSO READ: Bonds record biggest weekly gain since Jan
The yield on the 10-year benchmark bond which ended at 8.96 per cent on April 2 had risen to 9.10 percent on April 7, the highest level for benchmark 10-year notes since November 22. On Friday the yield ended at 8.94 per cent.
"The yields went up very fast in few trading sessions. The market felt there is value in buying the bonds. The yield level above 9 per cent attracted buyers," said Mohan Shenoi, president - group treasury and global markets, Kotak Mahindra Bank. According to Shenoi there is significant supply pressure every month due to the bond auctions.
This week the Reserve Bank of India (RBI) will auction government bonds for a notified amount of Rs 20,000 crore while for the first half (April-September) of the fiscal RBI is planning to auction bonds worth Rs 3.68 lakh crore. "As per our internal assessment there is about Rs 1,40,000 crore gap between demand and supply for the entire fiscal. This is taking into account net state loans, net treasury bills and net government borrowings. Assuming that banking sector deposits growth at the rate of 15 per cent this fiscal and assuming that banks will not invest more than 23 per cent in Statutory Liquidity Ratio (SLR). Assuming some Foreign Institutional Investors (FII) inflows into long-term bonds and assuming insurance companies buying bonds, this mismatch can be breached only through Open Market Operations (OMOs). But RBI may not do OMOs. Therefore, this would put sustained pressure on yields. Till month end the yield on the 10-year bond may trade in the range of 8.90 to 9.10 per cent," said Shenoi.
The CPI inflation data is expected this week and there are concerns in the market that the Consumer Price Index (CPI) inflation for March may rise. This may result in the 10-year bond yield once again breaching the 9 per cent mark. "The possibility of the yield again breaching 9 per cent cannot be ruled out. If the yield rises from here then traders who missed the opportunity of not buying may come and start buying. Buying will again emerge at 9.05 per cent yield level," said Siddharth Shah, vice president, STCI Primary Dealer.
CPI inflation eased more than expected to a 25-month low of 8.1 per cent in February, helped by moderating food prices.
Source » BS
Thanking you
Regards,
Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com
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Trading volumes in the government securities market has jumped by 200 per cent since the beginning of the new financial year as investors see value in the paper which also helped the yields softening from a high of 9.1 per cent. Earlier this month the yield on the 10-year benchmark government bond breached 9 per cent, which attracted buyers.
According to data from Clearing Corporation of India Limited (CCIL) the trading volume of government bonds grew by nearly 200 per cent to Rs 40,240.46 crore on April 11 from Rs 13,459.03 crore on April 2. While the trading volume in the 10-year benchmark government bond rose to Rs 24,170.13 crore on April 11 from Rs 6,771 crore on April 2 recording a growth of almost 260 per cent.
ALSO READ: Bonds record biggest weekly gain since Jan
The yield on the 10-year benchmark bond which ended at 8.96 per cent on April 2 had risen to 9.10 percent on April 7, the highest level for benchmark 10-year notes since November 22. On Friday the yield ended at 8.94 per cent.
"The yields went up very fast in few trading sessions. The market felt there is value in buying the bonds. The yield level above 9 per cent attracted buyers," said Mohan Shenoi, president - group treasury and global markets, Kotak Mahindra Bank. According to Shenoi there is significant supply pressure every month due to the bond auctions.
This week the Reserve Bank of India (RBI) will auction government bonds for a notified amount of Rs 20,000 crore while for the first half (April-September) of the fiscal RBI is planning to auction bonds worth Rs 3.68 lakh crore. "As per our internal assessment there is about Rs 1,40,000 crore gap between demand and supply for the entire fiscal. This is taking into account net state loans, net treasury bills and net government borrowings. Assuming that banking sector deposits growth at the rate of 15 per cent this fiscal and assuming that banks will not invest more than 23 per cent in Statutory Liquidity Ratio (SLR). Assuming some Foreign Institutional Investors (FII) inflows into long-term bonds and assuming insurance companies buying bonds, this mismatch can be breached only through Open Market Operations (OMOs). But RBI may not do OMOs. Therefore, this would put sustained pressure on yields. Till month end the yield on the 10-year bond may trade in the range of 8.90 to 9.10 per cent," said Shenoi.
The CPI inflation data is expected this week and there are concerns in the market that the Consumer Price Index (CPI) inflation for March may rise. This may result in the 10-year bond yield once again breaching the 9 per cent mark. "The possibility of the yield again breaching 9 per cent cannot be ruled out. If the yield rises from here then traders who missed the opportunity of not buying may come and start buying. Buying will again emerge at 9.05 per cent yield level," said Siddharth Shah, vice president, STCI Primary Dealer.
CPI inflation eased more than expected to a 25-month low of 8.1 per cent in February, helped by moderating food prices.
Source » BS
Thanking you
Regards,
Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com
--
You received this message because you are subscribed to the Google Groups "Product Updates for AMC" group.
To unsubscribe from this group and stop receiving emails from it, send an email to Productupdatesforamc+unsubscribe@googlegroups.com.
For more options, visit https://groups.google.com/d/optout.
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