Sovereign yields edge higher on dampened sentiment; 10 Yr benchmark at 8.18% Govt securities :: Edelweiss

Visit http://indiaer.blogspot.com/ for complete details �� ��


Sovereign yields edge higher on dampened sentiment; 10 Yr benchmark at 8.18%
Government securities
 Sovereign yields edged higher as sentiment was dampened after RBI Governor’s
remarks, expressing concerns over the persistently high food inflation, fuelled
worry that further monetary tightening may be in store. The benchmark 10 Yr
bond & the 8.13% 2022 bond both closed 4 bps higher at 8.18% & 8.15%
respectively.
 Cut off yield for the state loan auction of INR 82.27 bn also moved higher amidst
concerns about the Reserve Bank’s move. The cut off was in the range of 8.48% -
8.55% range for the 11 state loans compared to 8.39% in the previous auction
held on 12th October.
Non-SLR market
 Issuance of Certificate of deposits continued to fall as fund houses preferred to
stay on the sidelines on account of the limited inflow in the liquid schemes. State
Bank of Mysore & SBBJ placed one year CD amounting to INR 2.50 bn & INR 1.50
bn respectively at 8.45%.Punjab National Bank placed one year CD amounting to
INR 1 bn at 8.47%. Bank of Maharashtra placed three month CD at 7.80% for a
quantum of INR 2.25 bn. Raymond India placed INR 450 mn three month CP at
8.24% while Shree Renuka Sugar placed INR 500 mn three month CP at 8.20%.
Money markets
 Demand for funds in the first week of the reporting cycle remained firm with banks
borrowing INR 877.50 at the LAF window. Massive injection of funds by the central
bank is indicative of the tight liquidity situation in the market. Call rates ended
firm at 6.78% while the CBLO rates ended at 5.82%.
Swaps
 OIS rates rose sharply as most participants chose to pay fixed rates anticipating a
further rate hike. The one year swap closed 6 bps higher at 6.76% while the five
year swap closed 5 bps higher at 7.23%