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Government securities
Sentiment in sovereign bonds remained positive owing to the announcement of the
OMO from the central bank, post market hours yesterday. However gilts gave
most of their gains as participants booked profits ahead of the buyback tomorrow.
The 8.13% 2022 remained the most liquid securities, closing 1 basis lower at
7.99% while the benchmark 10 Yr bond closed at 7.90%.
Buying interest was visible in the 2017 bond and the 2020 bond on anticipation of
FII inflow in these securities in January. On 2nd Dec SEBI had sold $ 5bn
investment limit in government bonds to FIIs and these limits have to be utilized
with 45 days of allocation.
Non-SLR market
CD issuance remained robust in the three month maturity. State Bank of India
raised another INR 17bn through three month CD at 9.05%. Yesterday SBI had
placed INR 26bn CD maturing on 25th March 2011 at 9.05%.
UCO Bank placed INR 10bn through three month CD at 9.15% while Central Bank
placed INR 5bn at 9.12%. Indian Bank & Punjab Sind Bank placed INR 3bn at
9.60% and INR 3.50bn at 9.70% respectively in April maturity CD. NABARD issued
three month CP amounting to INR 2bn at 9.09%.
Money markets
Call rates eased marginally closing 2 bps lower at 6.85% as most banks have
covered their fortnightly reserve requirement. LAF borrowing also edged lower to
INR 1.25trn compared to INR 1.34 trn on Monday.
Concerns over the liquidity still persist, despite the INR 480bn buyback plan from
the central bank, visible in the flattish swap curve. Aggressive borrowing by banks
at the LAF and the worries of inflation has pushed the one year swap rate to
7.10% compared to 6.96% a fortnight ago.
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