The Reserve Bank of India has said new issuances of 14–to 30-year bonds will not be included in the Fully Accessible Route, meaning foreigners cannot freely invest in their papers. This comes after bond index providers included FAR securities in global bond indices. Investors could view this as India's policy flip-flop. It is likely that RBI wants more foreign investments at the shorter end of the curve.
Top 3 Leads Today
- Risk from F&O under check, but intervention needed, says SEBI Buch.
- SEBI proposes to revise minimum contract size for index derivatives.
- BoP surplus aids RBI's resolve to strengthen FX reserves, says Barclays.
Indian Markets
- Money Markets Minute: The call money market rate ended below the Reserve Bank of India's standing deposit facility rate of 6.25% as demand for funds eased. The one-day call money rate closed at 5.75%, down from 6.25% on Monday. The weighted average call rate was 6.47%, slightly lower than Monday's 6.48%.
- Government Bond Brief: Government bond yields ended higher, with varied reactions across short- and long-term bonds. Bonds maturing in 15 years and above fell sharply due to large sales by foreign investors after the Reserve Bank of India limited inflows into newer long-duration bonds. The 10-year benchmark 7.10% 2034 bond closed at a 6.93% yield, up from 6.92% on Monday. Turnover was ₹750.35 billion, down from ₹879.50 billion on Monday
- Corporate Bond Beat: Yields on corporate bonds remained flat in the secondary market due to subdued investor participation and a lack of triggers. Activity was limited to mutual funds and a few banks, while other major investors stayed on the sidelines. Overall deals totaled ₹73.42 billion, down from ₹100.59 billion on Monday.
- Forex Flash: The rupee ended flat at a record low of 83.7275 per dollar, pressured by importers' month-end dollar purchases. It moved within a narrow range of 2 paise and closed at this record level for the third consecutive day.
- Stocks Spotlight: Despite a volatile start from weak global cues, domestic equity indices closed at record highs, supported by strong June quarter earnings. Gains were trimmed in the final hour as investors booked profits and awaited the Federal Open Market Committee's meeting outcome. The Nifty 50 and Sensex each rose 0.1%, closing at 24,857.30 and 81,455.40 points, respectively.
International Markets
- US Stocks: The S&P500 and Nasdaq indices fell on Tuesday, led by losses in mega-cap and technology shares ahead of prominent technology companies' quarterly releases. Microsoft predicted lower-than-expected April-June results, while Nvidia shares fell more than 7% on Tuesday. On Friday, the Dow Jones index gained 0.5%, the S&P 500 declined 0.5%, and the Nasdaq Composite lost 1.28%.
- Treasuries: US Treasury yields fell in choppy trade as investors awaited the outcome of the Federal Reserve meeting on Wednesday. The Fed is likely to keep interest rates constant for the time being but may lower them in September. The yield on benchmark US 10-year notes fell 3.5 basis points to 4.143%, from 4.178% late Monday. The 30-year bond yield declined 3.2 basis points to 4.4013%, from 4.433% late Monday.
- Currency: The dollar index lost 0.03% to 104.55 on Tuesday. The US dollar fell against Japanese yen by 0.56% to 153.14. The Japanese currency rose on indications that the Bank of Japan is considering raising interest rates to 0.25% when its two-day meeting ends on Wednesday. The euro declined against the greenback to 0.09% to $1.0809.
Trading Trends
Traded volume(in Cr) in corporate bonds by sector and maturity:
| Sectors | 0-1y | 1-3y | 3-5y | 5-10y | >10y |
|---|---|---|---|---|---|
| NBFC | 412 | 2404 | 380 | 196 | 60 |
| Financial Institution | 150 | 590 | 1331 | 165 | 25 |
| Private Sector Bank | 106 | 5 | - | 139 | - |
| Diversified | 200 | - | - | - | - |
| Public Sector Bank | - | - | - | 80 | - |
Secondary trade details for recently issued primary corporate bonds:
Security Name |
Issue Date |
Trades Since Issue(Cr) |
Avg Yield(%) |
LTY (%) |
|---|---|---|---|---|
| 7.39 IRFC 15JUL34 | 2024-07-15 | 1415.00 | 7.40 | 7.39 |
| 7.89 BAJAJ HFL 14JUL34 | 2024-07-15 | 1090.00 | 7.88 | 7.87 |
| 7.54 BOI 19JUL34 | 2024-07-19 | 940.00 | 7.55 | 7.55 |
| 7.40 CANARA BANK 19JUL34 | 2024-07-19 | 545.00 | 7.39 | 7.38 |
| 8.00 TATAIND 21JUL25 C 17JUL26 M | 2024-07-19 | 429.00 | 7.96 | 7.94 |
| 8.71 HDB PERP 12JUL34 C | 2024-07-15 | 410.00 | 8.65 | 7.92 |
| 8.01 TATACAPITAL 21JUL34 | 2024-07-23 | 349.00 | 8.00 | 8.00 |
| 8.60 GODREJFINLTD 25NOV27 | 2024-07-25 | 250.00 | 8.65 | 8.66 |
| 7.36 IOCL 16JUL29 | 2024-07-16 | 236.10 | 7.34 | 7.35 |
| 8.20 TFSIN 16JUL29 | 2024-07-16 | 165.00 | 8.19 | 8.19 |
| 8.08 KMPL 21OCT27 | 2024-07-15 | 165.00 | 8.10 | 8.10 |
| 9.00 CHOLAINVFIN 09APR31 | 2024-07-15 | 110.00 | 9.00 | 9.00 |
| 7.39 IREDALTD 24JUL34 C 22JUL39 M | 2024-07-24 | 110.00 | 7.38 | 7.39 |
| 8.50 CHOLAINVFIN 25JUL27 | 2024-07-25 | 100.00 | 8.49 | 8.50 |
| 9.75 INDIABULLS HOUSING 23JUL29 | 2024-07-23 | 62.00 | 11.01 | 11.01 |
| 8.97 MUTHOOT FINANCE 18JAN27 | 2024-07-18 | 50.00 | 8.91 | 8.85 |
Source: Harmoney data analytics
Events This Week
July 31, Wednesday:
- US Interest rate decision.
- US Pending Home Sales Index for June.
- India Fiscal Deficit for June.
- India RBI Monetary and Credit Information Review.
- India Infrastructure Output for June.
August 1, Thursday:
- US Manufacturing PMI for July.
- Global Manufacturing PMI for July.
- US Domestic Auto Industry Sales for July.
- India Manufacturing PMI for July.
August 2, Friday:
- US Employment Report for July.
- India FX Reserves for Jul 22 week.
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