Edelweiss: Sentiment remains weak ahead of OMOs; ten year bond witness some buying

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Sentiment remains weak ahead of OMOs; ten year bond witness some buying
Government securities
 Sovereign yields traded in a narrow range today, though the sentiment is still
weak on worries of an impending rate action from the central bank at its review
meeting. The ten year benchmark bond found some respite as the central bank
announced its buyback in the last tranche of OMOs to be held tomorrow. The bond
closed 2 bps lower at 8.20%. 7.17% 2015 bond was the worst hit today, rising 9
bps, mainly on account of its fresh supply on Friday. Overall sentiment in the
market remains cautious, as participants refrain from taking big positions ahead of
the release of the IIP data on Wednesday and WPI data on Friday.

 Swap rates continued their upward trajectory for the third day in a row as banks
preferred fixed position. The one year swap ended 5 bps higher at 7.35% while the
five year swap closed at the 8.00% mark.
Non-SLR market
 Axis Bank placed INR 8bn of one year CD at 9.75% and five month CD amounting
to INR 5bn at 9.60%. Punjab National Bank and Andhra Bank placed INR 10bn and
INR 2bn of three month CD respectively at 9.07% while Punjab & Sind Bank placed
INR 2.25bn of five month CD at 9.60%. IOC raised INR 5bn of 14th March maturity
CP at 7.72% while NHB placed INR 2bn of 24th March maturity CP at 7.85%.
Money markets
 With the central bank’s liquidity injection over the past three weeks, the strained
situation as improved significantly. LAF borrowing has dropped to an average of
INR 775bn for the current fortnight compared to INR 1.40trn in the previous
fortnight. Call rates remained stable closing marginally above the central bank’s
lending rate. CBLO rates ended at 6.22% today with total volumes marginally
lower at INR 692bn.