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Lack of sovereign supply prompts buying in the bonds, inflation worrying
Government securities
Sovereign bonds witnessed a sharp rally in anticipation that the government may
not conduct another auction this week owing to the comfortable cash balance,
despite the truncated borrowing in December. GoI cash balance with the central
bank stood at INR 270bn as on Feb-4. The benchmark ten year bond ended at
8.11% while the 8.13% 2022 bond closed at 8.16%, down 5bps from Friday’s
close. Volumes also saw significant improvement to INR 90bn com
pared to last
week’s average volume of INR 52bn.
Swap rates on the short end edged higher despite a fall in the WPI inflation for
January to 8.23% from 8.43% in December. Although there is a sharp decline in
the manufacturing inflation, the M-o-M fall is too small to be comfortable. The
decline, despite an increase in the overall index in January, is on account of a high
base effect. If the current trend continues, the headline inflation rate in March will
be much higher than the central bank’s projection of 7%.
Non-SLR market
Short term rates rose 8-10bps across maturities on account of the limited inflows.
Three month CDs were dealt at 9.95% while similar maturity CPs was placed at
10.10%. Punjab & Sind Bank placed INR 2.40bn three month CD at 9.90% while
Andhra Bank placed INR 5bn of three month CD between 9.85%-9.90%. Punjab
National Bank placed one year CD at 9.99% for a quantum of INR 4.25bn. Blue
Star placed INR 250mn of three month CP at 10.25%.
Money markets
Overnight rates rose firmly due to the robust demand for funds from banks at the
beginning of the reporting cycle. Banks borrowed INR 925bn today compared to
INR 829bn on Friday in order to maintain a significant cushion for the CRR
requirement. Call rates closed at 6.84% while the CBLO rates ended at 6.50%.
However with the absence of sovereign auction this week and inflow of INR 70bn
in coupon payments on Thursday, overnight rates will hover marginally above the
central bank’s lending rate through the week.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lack of sovereign supply prompts buying in the bonds, inflation worrying
Government securities
Sovereign bonds witnessed a sharp rally in anticipation that the government may
not conduct another auction this week owing to the comfortable cash balance,
despite the truncated borrowing in December. GoI cash balance with the central
bank stood at INR 270bn as on Feb-4. The benchmark ten year bond ended at
8.11% while the 8.13% 2022 bond closed at 8.16%, down 5bps from Friday’s
close. Volumes also saw significant improvement to INR 90bn com
pared to last
week’s average volume of INR 52bn.
Swap rates on the short end edged higher despite a fall in the WPI inflation for
January to 8.23% from 8.43% in December. Although there is a sharp decline in
the manufacturing inflation, the M-o-M fall is too small to be comfortable. The
decline, despite an increase in the overall index in January, is on account of a high
base effect. If the current trend continues, the headline inflation rate in March will
be much higher than the central bank’s projection of 7%.
Non-SLR market
Short term rates rose 8-10bps across maturities on account of the limited inflows.
Three month CDs were dealt at 9.95% while similar maturity CPs was placed at
10.10%. Punjab & Sind Bank placed INR 2.40bn three month CD at 9.90% while
Andhra Bank placed INR 5bn of three month CD between 9.85%-9.90%. Punjab
National Bank placed one year CD at 9.99% for a quantum of INR 4.25bn. Blue
Star placed INR 250mn of three month CP at 10.25%.
Money markets
Overnight rates rose firmly due to the robust demand for funds from banks at the
beginning of the reporting cycle. Banks borrowed INR 925bn today compared to
INR 829bn on Friday in order to maintain a significant cushion for the CRR
requirement. Call rates closed at 6.84% while the CBLO rates ended at 6.50%.
However with the absence of sovereign auction this week and inflow of INR 70bn
in coupon payments on Thursday, overnight rates will hover marginally above the
central bank’s lending rate through the week.
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