Yields edged lower on absence of fresh supply in the coming weeks: Edelweiss

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Yields edged lower on absence of fresh supply in the coming weeks
Government securities
 Yields edged lower for a second session in a row on anticipation that there may not
be any more fresh supply in the coming weeks. Post the INR 100bn auction this
Friday; the government is unlikely the INR 100bn that it skipped in December due
to the significant cash balance. The benchmark ten year bond closed 3 bps lower
at 8.15% while the most liquid 8.13% 2022 bond closed 1 basis lower at 8.22%.

Non-SLR market
 CD issuance remained robust with banks mopping up INR 30bn in order to
refinance their instruments maturing in the month. Due to the limited buying from
fund houses, rates rose marginally across maturity. Three month CDs were dealt
at 9.75% while one year CDs were placed at 9.95%. CP rates in the three month
segment closed in the 10.00%-10.10% range.
 Indian Overseas Bank placed INR 5bn six month CD at 9.90% and INR 6bn of
three month CD at 9.75%. IDBI Bank placed INR 3bn of three month paper at
9.75% and INR 1.70bn of one year paper at 9.98%. Axis Bank raised INR 6bn of
one year CD at 10.00%.
Money markets
 Overnight rates remained steady above the central bank’s lending rate as the
system liquidity continues in the deficit mode. Although system liquidity has
improved drastically over the fortnight, the central bank is likely to keep it in the
negative mode in order to maintain an effective transmission of the policy rate
action.
 The call rates ended at 6.59% while the CBLO rates closed at 6.48%. Volumes at
the CBLO window dipped marginally owing to the waning demand from bank
towards the end of the reporting cycle.