Successful buyback for GoI, mops up INR 115bn at OMOs:: Edelweiss

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Successful buyback for GoI, mops up INR 115bn at OMOs
Government securities
 GoI bought back securities worth INR 115bn against a planned buyback of INR
120bn, significantly higher than the previous OMO (22nd Dec) where the buyback
was only INR 80.58bn.

 The central bank’s decision to select more than the usual number of securities for
the OMO ensured a wider response and spread out buying across tenures. GoI
bought back INR 55bn of the 8.13% 2022 bond at a cut off yield of 7.99% and INR
31.24bn of the 7.99% 2017 bond at a cut off yield of 7.77%. Besides these
securities, GoI mopped up INR 24.17bn of 8.26% 2027 bond and INR 5.24bn of
7.02% 2016 bond.
 Volumes on the trading platform remained muted ahead of the results of the
OMOs, clocking in a mere INR 36.20bn compared to INR 66bn yesterday.
Sovereign bonds traded in a narrow range with the ten year bond closing
unchanged at 7.90% while the 8.13% 2022 closing 1 basis higher at 8.00%.
Non-SLR market
 Short term rates eased marginally as buying interest was seen from mutual funds
on views that the rates are unlikely to rise further from these levels. SBBJ placed
INR 3.50bn of one year CD at 9.70% and INR 1.50bn of six month CD at 9.69%.
Punjab National Bank placed INR 11bn of March maturity CD at 8.98% while
Central Bank placed same maturity CD at 9.05% for a quantum of INR 5bn. IDBI
placed INR 2.75bn of one year CD at 9.77%. In the CP market, Srei Infra raised
INR 1bn of three month CP at 9.45%.
Money markets
 The central bank injected INR 1.30trn in the system through its repo window.
Successfully OMO and the absence of a sovereign auction will help ease the grim
liquidity situation, however the liquidity will still remain far from the comfort level
desired by the central bank unless accelerated government spending trickles in.