[Investors Please Listen] Yield bearishness induces vicious sell-off spiral; 7.94% 2021 up 6bps

Yield bearishness induces vicious sell-off spiral; 7.94% 2021 up 6bps     

n               The domestic debt market continued its ongoing bearishness as it failed to react to softening yield of US 10-year treasuries; the second most active bond and recently re-issued (on July 31) 7.94% 2021 rose 10bps intraday to close at 7.42%.

n               Pessimism was also evident in dismissal volumes traded on NDS-OM. Bonds worth INR 59 bn changed hands, significantly below 5 DMA of INR 73 bn.  Bidding interest was skewed in to be re-issued 10-year benchmark mopping up 27% of the total trade.

n               On first trading day of the non-reporting week, volumes in the overnight money market were buoyant; cumulative volumes over previous trading day rose by INR 120 bn to INR 897 bn at an average rate of INR 2.91 bn. Surplus funds parked with RBI, which on previous trading day had plunged to INR 977 bn (1 month low), surged back to trillion mark; INR 1.16 tn were parked with the apex bank.

n               The short-term (less than 1-year) primary segment failed to attract any biding interest as volumes in the same plunged to zero. Activity in the secondary market was also dismissal; INR 1.75 bn volumes in expected to be account of some profit booking. Corporate bonds followed the direction of sovereign debt; however, the intensity was much higher—2-5 year segment witnessed selling pressure. 5 and 10-year quasi sovereign debt closed at 8.20 and 8.68%, respectively.

n               Trade data released continued to paint a grim external trade picture. While exports plunged by 27.7% Y-o-Y, imports contracted 29.3%, resulting in trade deficit of USD 6.16 bn in June compared to USD 5.2 bn in May.

 

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