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Yields steady ahead of OMO results; LAF injection continues over INR 1trn
Government securities
Sovereign bonds ended steady today; watchful ahead of the results of the central
banks planned INR 120bn OMO. Volumes remained dull at INR 34bn reflective of
the nervous sentiment of the market. The most traded 8.13% 2022 bond closed 2
bps lower at 8.18%, as participants preferred holding the more liquid paper
compared to the 10 Yr benchmark.
Non-SLR market
Non SLR yield curve continues to be inverted owing to the current liquidity
situation, with the spread between the 1s10s bond closing at -35 bps today
compared to a spread of 25 bps a month ago. Outflow of corporate advance taxes
to the tune to INR 550bn will further magnify the situation.
Syndicate Bank & IOB placed three month CD amounting to INR 5bn & INR 2.75bn
respectively at 8.96% while Corporation Bank & PNB placed three month CD
amounting to INR 6bn and INR 2.75bn at 8.95%. Central Bank placed three month
CD at 8.97% for an amount of INR 5bn. In the one year CD, Bank of India placed
INR 2.25 bn at 9.30% while State Bank of Patiala placed INR 1.50bn at 9.25%.
Money markets
Call rates eased marginally to 6.49% compared to 6.67% yesterday, since banks
resorted to the LAF facility to meet their reserve requirement. The net borrowing
continued to be upwards of INR 1.25trn for the first week of the reporting
fortnight.
Swaps
One year and five year swaps closed 2 bps higher at 6.96% and 7.49%
respectively.
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