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Government securities
India’s Government bonds declined driving yields up during the day due to cash
crunch at local banks, however at the end of the day yields fell again. The ten year
bench mark bond closed 1 bp lower at 7.93% while 8.13% GOI 2022 bond closed
at 8.02%. Volume in the ten year benchmark was INR 3.5bn.
Food inflation rose up again crossing double digits at 12.13% for the week ended
December 11. Sudden increase in food inflation could prompt the Reserve Bank to
hike key rates in its next policy review. RBI Governor Subir Gokarn had already
suggested yesterday that more tightening policies could be taken to bring the
inflation under further control.
Underwriting Auctions were conducted where the underwriting cutoff rate for
7.17 % Government Stock 2015, 8.08 % Government Stock 2022 and 8.30 %
Government Stock 2040 was 0.38 paise, 0.42 paise and 0.51 paise per INR 100
respectively.
The one year OIS closed 3 bps higher at 6.97% while the 5 year OIS closed the
same at 7.64% vs. the previous day.
Non-SLR market
State Bank of India raised INR 11.5bn, Andhra Bank raised INR 5bn and ING
Vysya Bank raised INR 3.5bn in the form of 3 month CDs at 8.97%, 9.08% and
9.35% respectively. State Bank of Travancore placed INR 2.35bn of 4 month CDs
at 9.5%.
Money markets
Call rates ended flat again at 6.98% as there continued pressure on liquidity in
the reporting week. CBLO closed at 6.27%.
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