• 16 JUN
  • Knight Snippet
  • 16/06/2021

Transcript

Good Morning Treasurers,
This is your host Parthesh Shah, Co-Founder of Knight Fintech and you are listening to Knight Snippets.
Here is all what you need to know before going into trade for 16-June-2021.

International Market:
- Treasury yields were flat on Tuesday as investors anticipate signals of upcoming monetary policy in the Federal Reserve’s two-day meeting
- The Fed is not expected to take any policy action in its meeting, though investors will be listening to Powell’s comments closely for any signals of the central bank’s eventual asset purchase tapering plans
- US 10-year closed at 1.51% and 30-year at 2.20% on Tuesday

Watch Out:
- Mr. Powell's commentary on FOMC policy today

Crude Oil Market:
- Crude is trading at $74.38/bbl
- Crude short term range: $70-75

Currency Market:
- Dollar index (DXY) is at: 90.55
- DXY today's range: 89.53 - 90.90
- USDCNY or Chinese yuan is at 6.40
- USDINR with a low of 73.16, closed at 73.31
- USDINR range: 73.05 - 73.60

Watch Out:
- FOMC meeting today
- DO NOT carry any overnight positions and don't do range/mean reversion trading today!

Domestic Market:
- Govt bond prices slumped yesterday for the various reasons:

Reason#1:
- CPI @ 6.30%, which was 80 bps higher than Knight forecast and also higher than RBI's 6.00% comfort range
- Higher CPI limits RBI's ultra-loose monetary policy and may require adjustment to money flow

Reason#2:
- 5.85 GS 2030 outstanding have already reached Rs. 1.19 Lakh Cr (informal cap: Rs. 1.20 Lakh Cr)
- There were some expectations that the informal cap will be increase to Rs. 1.5 Lakh Cr as RBI is holding majority of 5.85 2030 controlling the benchmark yields
- If RBI issues a new benchmark, it would be difficult to control the yields and will have to wait for at least 4 issuances/auctions
- But, so far there have been no announcements of increasing informal cap, hence traders are liquidating their 5.85 GS 2030 position, before it is illiquid

Reason#3:
5.63 GS 2026 is not included in G-SAP 1.0 third tranche which had triggered the sell-off from 5.49%

Reason#4:
6.64 GS 2035 has run a lot in past 1-week, and hence traders are booking partial profits

- 5.63 GS 2026 closed at 5.64% Vs 5.54% the previous trading day;  
- 5.85 GS 2030 closed at 6.04% Vs 6.00% the previous trading day;  

Let's have a look at yesterday's trading activity:
The following were the net sellers:
Foreign Banks: Rs. 2,652 Cr
Mutual Funds: Rs. 710 cr
Primary Dealers: Rs. 2,833 Cr (remember, Rs. 9,975 Cr of 5.85 GS 2030 was devolved on PDs at 5.99% ???)

The 5.85 GS 2030 closed at 6.04 yesterday. Till now, PDs didn't sell as they were waiting for G-SAP 1.0 third tranche

The only savior for the market was: Public Sector Banks with net Rs. 4,787 Cr buying

Knight Research recent success:
#1: Accurately assessed WPI @ 13.00% forecast Vs. 12.94% actual
#2: Informed the possibility of new benchmark expected on 25-June-2021 G-Sec auctions
#3: Correctly assessed the risk for WPI/CPI and asked clients to EXIT before 12.00PM (WPI announcement)
#4: Correctly predicted the minor sell-off yesterday even though 5.85 GS 2030 opened steady yesterday

These all can't be co-incidences, right?
- Have you noticed that, we haven't been giving any intra-day trading calls for the last few days?
- Trading team had sniffed the risk and is staying away from the market for few days (until FED commentary today)

Trading Range:
5.85 GS 2030 range: 6.00% - 6.10% range

A word of caution:
- Global inflation is a reality and Indian bond markets can't stay isolated for long
- RBI can hold the rates steady, but can't improve the demand for dated securities at prevailing yields
- RBI can't cut rates any further due to higher CPI
So, the answer is very well written. You just need to read it clearly and assess the risk which you are carrying in your portfolio.

 That's it for today.  You were listening to Knight Snippets with Parthesh Shah from Knight Fintech.

See you on tomorrow with a new episode of Knight Snippets.

Macro Economic Events

Indicator Last Expected AsOn Next
Inflation Rate MoM MAY   [GB] 0.60 0.30 14/06/21 16/06/21
Inflation Rate YoY MAY   [GB] 1.50 0.70 14/06/21 16/06/21
Balance Of Trade MAY   [SG] 5,755 5,414 14/06/21 17/06/21
Core PPI MoM MAY   [US] 0.0000 122.0000 14/06/21 15/06/21
Foreign Bond Investment   [JP] 410.6 664.8 14/06/21 17/06/21
Foreign Bond Investment APR   [US] 118,900 -65,500 14/06/21 16/06/21
Unemployment Rate MAY   [RU] 5.20 5.40 18/06/21 21/06/21
Loan Prime Rate 5 Y   [CN] 0.0000 0.0000 18/06/21 21/06/21
Balance Of Trade MAY   [JP] 255.3 662.2 14/06/21 16/06/21
Industrial Production YoY MAY   [CN] 9.80 14.10 14/06/21 16/06/21
EXPORT MAY   [IN] 32,210 30,630 14/06/21 15/06/21
New Home Sales MAY   [US] 863.0 917.0 18/06/21 23/06/21
Markit composite PMI JUN   [AU] 56.1 58.0 18/06/21 23/06/21
Markit Services PMI JUN   [US] 70.4 64.7 18/06/21 23/06/21
Balance Of Trade MAY   [IN] -6,320 -15,100 14/06/21 15/06/21
Existing Home Sales MAY   [US] 5,800 5,850 18/06/21 22/06/21
FIXED ASSET INVESTMENT (YTD) YoY MAY   [CN] 19.9 25.6 14/06/21 16/06/21
Loan Prime Rate 1Y   [CN] 3.85 3.85 18/06/21 21/06/21
Stock Investment by Foreigners   [JP] -33.2 94.7 14/06/21 17/06/21
Core Inflation Rate YoY MAY   [SG] 0.80 0.60 18/06/21 23/06/21
EXPORT YoY MAY   [JP] 7,181 7,378 14/06/21 16/06/21
Core PPI YoY MAY   [US] 122.8 122.0 14/06/21 15/06/21
Industrial Production YoY MAY   [CN] 9.80 14.10 14/06/21 16/06/21
Inflation Rate YoY MAY   [SA] 5.30 4.90 14/06/21 15/06/21
New Home Sales MoM MAY   [US] 863.0 917.0 18/06/21 23/06/21
Interest Rate Decision   [BR] 4.25 3.50 14/06/21 17/06/21
Markit Services PMI JUN   [AU] 56.0 58.0 18/06/21 23/06/21
Retail Sales MoM MAY   [AU] 0.1000 1.1000 18/06/21 21/06/21
Unemployment Rate MAY   [AU] 5.10 5.50 14/06/21 17/06/21
Retail Sales YoY MAY   [RU] 34.7 -3.4 18/06/21 21/06/21
PPI Input YoY MAY   [GB] 9.90 10.60 14/06/21 16/06/21
Retail Sales MoM MAY   [US] 0.0000 10.7000 14/06/21 15/06/21
PPI Output MoM MAY   [GB] 111.6 111.1 14/06/21 16/06/21
Employment Change MAY   [AU] 115,200 -30,700 14/06/21 17/06/21
Inflation Rate MoM MAY   [SG] 0.80 -0.20 18/06/21 23/06/21
Housing Price Index QoQ Q1   [AU] 3.00 0.80 14/06/21 15/06/21
Inflation Rate YoY MAY   [SG] 2.40 2.10 18/06/21 23/06/21
Core Inflation Rate YoY MAY   [GB] 1.30 1.10 14/06/21 16/06/21
GDP YoY MAY   [RU] 10.7 0.8 18/06/21 21/06/21
Import YoY MAY   [JP] 6,926 6,714 14/06/21 16/06/21
Initial Jobless Claims   [US] 412.0 375.0 14/06/21 17/06/21
Employment Change MAR   [GB] 84.0 -73.0 14/06/21 15/06/21
Current Account Q1   [US] -188,484 -180,917 18/06/21 23/06/21
Housing Price Index YoY MAY   [CN] 4.90 4.80 14/06/21 17/06/21
PPI MoM May   [RU] 227.2 221.5 14/06/21 17/06/21
Unemployment Rate MAY   [CN] 5.10 5.30 14/06/21 16/06/21
Markit Manufacturing PMI JUN   [AU] 58.4 60.4 18/06/21 23/06/21
Unemployment Rate APR   [GB] 4.80 4.90 14/06/21 15/06/21
Markit Manufacturing PMI JUN   [US] 62.1 60.5 18/06/21 23/06/21
Unemployment Rate Q1   [SG] 2.90 3.30 14/06/21 15/06/21
PPI Output YoY MAY   [GB] 3.90 2.30 14/06/21 16/06/21
PPI MoM May   [RU] 227.2 221.5 14/06/21 17/06/21
Existing Home Sales MoM MAY   [US] 5,800 5,850 18/06/21 22/06/21
Retail Sales YoY MAY   [US] 51.2 29.0 14/06/21 15/06/21
Housing Price Index YoY Q1   [AU] 3.00 0.80 14/06/21 15/06/21
Markit Composite PMI JUN   [US] 68.7 63.5 18/06/21 23/06/21
GDP Growth Rate YoY Q1   [RU] -1.00 -1.80 14/06/21 15/06/21
Industrial Production YoY MAY   [RU] 7.20 2.30 18/06/21 23/06/21
PPI YoY MAY   [KR] 6.40 6.00 18/06/21 23/06/21
IMPORT MAY   [IN] 38,530 39,598 14/06/21 15/06/21
Manufacturing Production YoY MAY   [US] 23.0 3.2 14/06/21 15/06/21
Industrial Production YoY MAY   [US] 16.5 1.0 14/06/21 15/06/21
PPI MoM May   [KR] 108.5 108.1 18/06/21 22/06/21

Auctions

Knight Statistical Poll vs. Actual Results
Security Name Tenure Notified Amount Expected
Cut-Off
Recommended At Actual-Cut-Off Amount Accepted Auction Type Announcement date Auction Date Settlement Date Source
6.83% MHSDL 2031 10 Y 1000 6.83% 22/06/21 16:40 6.83% 1500 Yield 17/06/21 22/06/21 23/06/21
7.07% HRSDL 2037 16 Y 2000 7.02% - 7.05% 22/06/21 16:41 7.07% 2000 Yield 17/06/21 22/06/21 23/06/21
91 DTB 16/09/2021 91 DTB 15000 3.42% - 3.44% 16/06/21 14:58 3.4692% 15000 Yield 11/06/21 16/06/21 17/06/21
6.81% KLSDL 2031 10 Y 1000 6.82% - 6.84% 15/06/21 15:21 6.81% 1000 Yield 10/06/21 15/06/21 16/06/21
6.83% MHSDL 2032 11 Y 1000 6.85% - 6.88% 15/06/21 15:19 6.83% 1500 Yield 10/06/21 15/06/21 16/06/21
5.63% GS 2026 5 Y 11000 99.87 - 99.92 18/06/21 19:35 100.11 8221 Price 14/06/21 18/06/21 21/06/21
6.88% UPSDL 2031 10 Y 2500 6.84% 22/06/21 16:42 6.88% 2500 Yield 17/06/21 22/06/21 23/06/21
6.96% TNSDL 2056 35 Y 1000 7.05% - 7.10% 15/06/21 15:23 7.0289% 1000 Yield 10/06/21 15/06/21 16/06/21
7.03% TSSDL 2051 30 Y 3000 7.05% - 7.10% 15/06/21 15:26 7.03% 3000 Yield 10/06/21 15/06/21 16/06/21
6.80% MHSDL 2031 10 Y 1000 6.82% - 6.84% 15/06/21 15:24 6.80% 1500 Yield 10/06/21 15/06/21 16/06/21
6.84% RJSDL 2031 10 Y 750 6.82% - 6.84% 15/06/21 15:18 6.84% 750 Yield 10/06/21 15/06/21 16/06/21
6.67% GS 2050 30 Y 7000 7.03% - 7.05% 18/06/21 19:33 7.0254% 7000 Yield 14/06/21 18/06/21 21/06/21
7.09% KLSDL 2036 15 Y 1000 7.02% - 7.05% 22/06/21 16:36 7.09% 1000 Yield 22/06/21 22/06/21 22/06/21
6.64% GS 2035 15 Y 10000 99.58 - 99.63 18/06/21 19:34 99.60 12500 Price 14/06/21 18/06/21 21/06/21
6.81% PNSDL 2031 10 Y 1500 6.82% - 6.84% 15/06/21 15:16 6.8209% 1500 Yield 10/06/21 15/06/21 16/06/21
182 DTB 16/12/2021 182 D 15000 3.66% - 3.68% 16/06/21 14:59 3.6969% 15000 Yield 11/06/21 16/06/21 17/06/21
7.06% TSSDL 2041 20 Y 1000 - 22/06/21 16:34 7.06% 1000 Yield 17/06/21 22/06/21 23/06/21
6.90% RJSDL 2032 11 Y 1000 6.85% 22/06/21 16:32 6.90% 1000 Yield 17/06/21 22/06/21 23/06/21
6.83% TNSDL 2031 10 Y 1000 6.84% 22/06/21 16:30 6.83% 1000 Yield 17/06/21 22/06/21 23/06/21
182 DTB 23/12/2021 182 D 15000 3.72% - 3.73% 23/06/21 14:14 3.7189% 15000 Yield 18/06/21 23/06/21 24/06/21
6.92% HRSDL 2036 15 Y 1000 6.90% - 6.92% 15/06/21 15:08 6.92% 1000 Yield 10/06/21 15/06/21 16/06/21
6.78% GASDL 2031 10 Y 100 6.82% - 6.84% 15/06/21 15:10 6.78% 100 Yield 10/06/21 15/06/21 16/06/21
6.89% MHSDL 2032 11 Y 1000 6.86% 22/06/21 16:58 6.89% 100 Yield 17/06/21 22/06/21 23/06/21
6.96% TNSDL 2056 35 Y 1000 - 22/06/21 16:56 98.71 1000 Yield 17/06/21 22/06/21 23/06/21
7.06% KLSDL 2041 20 Y 1000 7.02% - 7.05% 22/06/21 17:08 7.06% 1000 Yield 17/06/21 22/06/21 23/06/21
5.65% TNSDL 2025 4 Y 1000 5.50% - 5.52% 15/06/21 15:15 5.65% 1000 Yield 10/06/21 15/06/21 16/06/21
7.04% RJSDL 2036 15 Y 1000 7.02% - 7.05% 22/06/21 17:09 7.04% 1000 Yield 17/06/21 22/06/21 23/06/21
6.89% GASDL 2030 10 Y 100 6.84% 22/06/21 16:45 6.89% 100 Yield 17/06/21 22/06/21 23/06/21
7.06% WBSDL 2036 15 Y 3000 7.02% - 7.05% 22/06/21 16:55 7.06% 3000 Yield 17/06/21 22/06/21 23/06/21
7.13% APSDL 2036 15 Y 1000 7.02% - 7.05% 22/06/21 16:52 7.13% 1000 Yield 17/06/21 22/06/21 23/06/21
91 DTB 23/09/2021 91 D 15000 3.48% - 3.50% 23/06/21 14:13 3.4679% 15000 Yield 18/06/21 23/06/21 24/06/21
364 DTB 16/06/2022 364 D 6000 3.74% - 3.76% 16/06/21 15:00 3.8526% 6000 Yield 11/06/21 16/06/21 17/06/21
6.05% RJSDL 2026 5 Y 750 6.12% - 6.14% 15/06/21 15:07 6.05% 750 Yield 10/06/21 15/06/21 16/06/21
7.06% KLSDL 2038 17 Y 500 7.02% - 7.05% 22/06/21 16:54 7.06% 500 Yield 17/06/21 22/06/21 23/06/21
364 DTB 23/06/2022 364 D 6000 3.85%- 3.86% 23/06/21 14:14 3.8851% 6000 Yield 18/06/21 23/06/21 24/06/21
6.75% GJSDL 2031 10 Y 1000 6.82% - 6.84% 15/06/21 15:06 6.75% 1000 Yield 10/06/21 15/06/21 16/06/21

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