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Swap rates edge higher despite easing liquidity, pricing an intermittent hike
Government securities
Bonds traded in a narrow range today ahead of the announcement of the choice of
securities for the weekly bond auction. Intraday, the 12 year bond weakened the
most in as expectation of fresh supply in the segment spurred selling. The most
traded 8.13% 2022 bond closed at 8.24% while the benchmark 10 year bond
closed at 8.21%. Swap rates saw a sharp rise across maturities pricing in a
possibility of an intermittent policy rate hike from the central bank if the
inflationary trend persist. Although the central bank has revised its target for
inflation to 7% for FY11 at the Jan meet, the rising food inflation due to the supply
side pressures continues to be a concern.
Non-SLR market
Issuance remained robust in the one year segment since banks preferred to lock in
rates on a view that short term rates may rise further. State Bank of Travancore
and State Bank Mysore placed INR 1bn and INR 2.50bn of one year CD at 9.90%.
IOB and Central Bank placed INR 7bn and INR 5bn of three month CD at 9.70%.
OBC placed three month CD at 9.68% while PNB placed INR 3bn of three month
CD at 9.72%. Mid March maturity CP was raised by Srei Equipment at 7.75% for a
quantum of INR 250mn.
Money markets
Overnight rates firmed marginally as there was strong demand from banks to
meet their reserve requirement. Banks borrowed INR 657bn at the twin LAF
window however the CBLO window continued to be the preferred option. CBLO
volumes remained robust at INR 600bn with rates closing marginally below the
central bank’s lending rate. Until 3rd Feb banks have maintained an excess of 2%
over the required CRR, reflective of the skewed borrowing during the reporting
cycle.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Swap rates edge higher despite easing liquidity, pricing an intermittent hike
Government securities
Bonds traded in a narrow range today ahead of the announcement of the choice of
securities for the weekly bond auction. Intraday, the 12 year bond weakened the
most in as expectation of fresh supply in the segment spurred selling. The most
traded 8.13% 2022 bond closed at 8.24% while the benchmark 10 year bond
closed at 8.21%. Swap rates saw a sharp rise across maturities pricing in a
possibility of an intermittent policy rate hike from the central bank if the
inflationary trend persist. Although the central bank has revised its target for
inflation to 7% for FY11 at the Jan meet, the rising food inflation due to the supply
side pressures continues to be a concern.
Non-SLR market
Issuance remained robust in the one year segment since banks preferred to lock in
rates on a view that short term rates may rise further. State Bank of Travancore
and State Bank Mysore placed INR 1bn and INR 2.50bn of one year CD at 9.90%.
IOB and Central Bank placed INR 7bn and INR 5bn of three month CD at 9.70%.
OBC placed three month CD at 9.68% while PNB placed INR 3bn of three month
CD at 9.72%. Mid March maturity CP was raised by Srei Equipment at 7.75% for a
quantum of INR 250mn.
Money markets
Overnight rates firmed marginally as there was strong demand from banks to
meet their reserve requirement. Banks borrowed INR 657bn at the twin LAF
window however the CBLO window continued to be the preferred option. CBLO
volumes remained robust at INR 600bn with rates closing marginally below the
central bank’s lending rate. Until 3rd Feb banks have maintained an excess of 2%
over the required CRR, reflective of the skewed borrowing during the reporting
cycle.
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