Demand for 50-year government bond seen firm from insurance firms

Rupee and bond gain post dovish stance by FOMC

Market participants see a firm demand for the 50-year bond scheduled for debut on Friday. The government plans to sell Rs 10,000 crore.

“We expect strong demand from the long-term investors. The 50-year bond has been introduced in response to a long-standing demand from the long-term investor community and, hence, we see no dearth of demand,” said Badrish Kulhalli, head (fixed income), HDFC Life Insurance.

“The demand will be good for the paper, and the coupon should be around where the 40-year bond is, that is 7.50 per cent,” said Churchil Bhatt, Executive Vice President at Kotak Life Insurance.

Meanwhile, government bonds and rupee gained on Thursday as the US Treasury yields fell after the US Federal Reserve decided to keep their interest rates unchanged at 5.25-5.5 per cent, along the expected lines, dealers said.

 

Market participants said the comments by US Federal Reserve Chair Jerome Powell were dovish. Even though he left the door open for further hikes, the market believes that the US rate-setting panel was done hiking.

“The idea that it would be difficult to raise again after stopping for a meeting or two is just not right. The committee will always do what it thinks is appropriate at the time,” said Powell. 

Earlier, the US rate-setting panel had indicated towards one final 25 basis points (bps) rate hike before hitting the pause button. 

The rupee settled at 83.25 per US dollar, whereas the yield on the benchmark 10-year government bond fell 4 bps to settle at 7.32 per cent. 

The Indian unit had hit a fresh closing low of 83.29 against the US dollar on Wednesday due to the rise in dollar index ahead of the US Federal Reserve outcome. 

“While we continue to see Fed on hold in December and through the first half of next year, we think the UST bear steepening would find some solace as the Fed’s tone gets softer. However, the rising term premium will likely be the next structural driver of higher yields in coming years,” said Madhavi Arora, lead economist, Emkay Global Financial Services.

The yield on the US benchmark 10-year US Treasury bond fell to 4.70 per cent on Thursday.

Bank deposits grow 12.4%, but slightly down sequentially

Bank deposits contracted sequentially by 0.44 per cent to Rs 193.79 trillion as on October 20, from Rs 194.64 trillion a fortnight ago. However, they rose by 12.64 per cent year-on-year (Y-o-Y) to Rs 193.79 trillion from Rs 172.04 trillion a year ago, according to Reserve Bank of India data.The bank credit rose 0.6 per cent sequentially to Rs 148.4 trillion as on October 20, from Rs 147.51 trillion a fortnight ago. The advances of commercial banks grew by 15.2 per cent Y-o-Y from Rs 128.83 trillion a year ago.