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Last tranche of buyback remains modest, only INR 75bn bought back
Government securities
GoI bought back INR 75bn at its final tranche of OMOs against a planned buyback
of INR 120bn. Buyback included INR 42.21bn of 8.08% 2022 bond, INR 17.33bn of
7.80% 2020 bond and INR 15.52bn of 7.46% 2017 bond. However sovereign
bonds traded firm today mainly on account of the demand from the foreign
institutional investors, who have to utilize the incremental limits allocated to them
by 15th January. The ten year benchmark bond closed 3 bps lower at 8.18% while
the second most liquid 8.13% 2022 bond closed at 8.17%, down 4 bps from
Tuesday’s close.
OIS rates eased marginally as a sharp slowdown in the industrial growth helped
pacify fears of a stern rate action by the central bank. Growth in industrial
production eased to 2.70% in November compared to 11.30% a month ago. The
one and five year swaps closed 3bps lower at 7.32% and 7.97% respectively.
Non-SLR market
United Bank and Indian Overseas Bank placed INR 2bn and INR 5.25bn of three
month CD respectively at 9.10%. Axis Bank raised another INR 8bn of one year
CD at 9.80% while Punjab National Bank placed INR 2bn of three month CD at
9.08%.
Money markets
Overnight rates hovered around the central bank’s lending rate on account of the
improved liquidity in the system. Call rates closed at 6.29% while the CBLO rates
ended at 6.22%. Borrowing at the LAF saw a marginal uptick to INR 822bn
compared to INR 775bn on Tuesday. However the inflows from the last tranche of
OMOs will be offset by the gilts auction to be conducted on Friday.
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