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Government securities
Sovereign bonds were mixed with bullishness in the benchmark bond before the
OMO scheduled tomorrow. The 10 Yr bond closed 4bps lower at 7.93%, while
8.13% GOI 2022 closed 1bps higher at 8.02%.Volumes in the benchmark bond
were INR 16.85bn.
Late yesterday, GOI announced INR 60bn of auction in 3 dated securities. INR
20bn each will be auctioned in 7.17% GOI 2015, 8.08% GOI 2022 and 8.30% GOI
2040. The fresh supply in the 2022 bond caused some bearishness in both
securities of that tenure.
A total of INR 31.90bn of state development loans were auctioned today. Kerala
and Uttar Pradesh auctioned INR 15bn and INR 10bn respectively at a cut off yield
of 8.34%.
The swap curve steepened today with a slight upward shift as the longer tenures
were paid today due to disappointment over the choice of securities for the OMO.
Traders now fear that these securities may not elicit a strong response during the
OMO. The 1 year OIS closed 1bp higher at 6.86% while the 5 year OIS closed 4bps
higher at 7.52%.
Non-SLR market
Central Bank of India placed INR 12bn of 3 months CD at 9.03%. Axis Bank raised
INR 5bn of 3 month CD at 9%. Indian Bank raised INR 5bn of 4 month CD at 9.50%.
Money markets
Call rates ended flat at 6.96% as there was continued pressure on liquidity as
banks try to meet their reserve requirements in the beginning of the reporting
fortnight. However, RBI’s OMO and SLR cut, along with some government
spending could ease pressure on liquidity in the near term, especially if reporting
requirements are met early. CBLO closed flat at 6.27%. LAF borrowing stepped up
to INR 1.59 trn today compared to INR 1.04 trn yesterday.
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