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Benchmark 10 Yr bond sees buying interest at 8.20% level
Government securities
Sovereign bonds traded in a thin band with volumes muted at INR 52bn for the
day. However the 7.99% 2017 bond, which will be auctioned this week, was
trading with a weak bias as traders cut holdings ahead of the fresh supply. The
7.99% 2017 bond closed 4 bps higher at 8.14%. The 7.80% 2020 bond saw some
value buying on view that the bond may remain the benchmark security for the
rest of the fiscal and GoI is unlikely to issue a new 10-Yr benchmark until the next
financial year. The bond gained 4 bps closing the day at 8.19%.
At the State Development Loan auction today, RBI set a cut off yield for the 10 Yr
bond in the range of 8.52% - 8.56%. Against a planned auction of INR 49bn, the
eight states mopped a total of INR 53.56bn. (Maharashtra State exercising its GS
option)
Non-SLR market
Corporation Bank and Axis Bank placed INR 4bn and INR 2.50bn of one year CD at
9.7650% and 9.85% respectively. Canara Bank placed 8th June-11 maturity CD at
9.58% for a quantum of INR 3bn. NABARD raised INR 5bn through 2nd Feb-11
maturity CP at 6.94% while Usha Martin raised INR 300mn of 11th Mar-11 CP at
8.30%.
Money markets
Overnight rates edged higher due to the strong demand for funds from bank in the
first week of the reporting cycle. Banks are covering the reserve needs in the first
week itself anticipating an increase in the borrowing cost at the repo window after
the policy meet on 25th January. Banks dependence on the LAF saw a sharp spike
in this fortnight mainly on account of the skewed borrowing from banks. Central
Bank injected INR 1.09trn into the system today compared to INR 1.06trn on
Monday. Call rates closed at 6.73% while the CBLO rates ended at 6.25% with
total money market volumes notching up to INR 754bn.
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