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Bonds witness a sharp rally on lower than expected borrowing plan for H1FY12
Government securities
Sovereign bond surged as a lower than expected borrowing in the first half of FY12
boosted sentiment. Out of the budgeted borrowing of INR 4.17trn, GoI announced
that it would borrow INR2.50trn, against an expected borrowing of INR 2.75trn,
during H1FY12. On a net basis, the government will borrow INR 1.90trn during
H1FY12. Due to a comfortable cash balance of INR 900bn and the tight liquidity
situation in the system, GoI was prompted to borrow only 60% of the total
borrowing during H1FY12 compared to 64.10% during H1FY11.
Bonds rallied across maturity due to the lower supply in the first half of FY12. The
volumes of the central bank trading platform also increased to INR 110bn
compared to an average of INR 59bn during the fortnight. The most liquid 8.13%
2022 bond gained 5bps closing at 8.02% while the 7.99% 2017 bond closed 6bps
lower at 7.90%.
Non-SLR market
Short term rates eased marginally due to improvement in the sentiment on the
longer end of the curve. However banks continued to borrow heavily through CDs
to meet their year-end target. So far in the month banks have mopped up INR
340bn through issuances of CDs. PNB raised INR 22bn of three month CD at
10.08% while Bank of Maharashtra placed INR 3bn of same maturity CD at
10.12%. Canara Bank and State Bank of Patiala placed INR 2.50bn each of one
year CD at 10.14%.
Money markets
Overnight rates remained firm despite lower borrowing at the LAF window as
banks were reluctant to lend ahead of the year-end. LAF borrowing averaged INR
1trn during the current fortnight; however it was mainly skewed towards the first
week of the fortnight on expectation of an increase in the repo rate at the policy
meet on 17th March-11. Call rates are likely to hover in the 7.55%-7.65% range
due to the strong interbank demand towards the end of the financial year.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bonds witness a sharp rally on lower than expected borrowing plan for H1FY12
Government securities
Sovereign bond surged as a lower than expected borrowing in the first half of FY12
boosted sentiment. Out of the budgeted borrowing of INR 4.17trn, GoI announced
that it would borrow INR2.50trn, against an expected borrowing of INR 2.75trn,
during H1FY12. On a net basis, the government will borrow INR 1.90trn during
H1FY12. Due to a comfortable cash balance of INR 900bn and the tight liquidity
situation in the system, GoI was prompted to borrow only 60% of the total
borrowing during H1FY12 compared to 64.10% during H1FY11.
Bonds rallied across maturity due to the lower supply in the first half of FY12. The
volumes of the central bank trading platform also increased to INR 110bn
compared to an average of INR 59bn during the fortnight. The most liquid 8.13%
2022 bond gained 5bps closing at 8.02% while the 7.99% 2017 bond closed 6bps
lower at 7.90%.
Non-SLR market
Short term rates eased marginally due to improvement in the sentiment on the
longer end of the curve. However banks continued to borrow heavily through CDs
to meet their year-end target. So far in the month banks have mopped up INR
340bn through issuances of CDs. PNB raised INR 22bn of three month CD at
10.08% while Bank of Maharashtra placed INR 3bn of same maturity CD at
10.12%. Canara Bank and State Bank of Patiala placed INR 2.50bn each of one
year CD at 10.14%.
Money markets
Overnight rates remained firm despite lower borrowing at the LAF window as
banks were reluctant to lend ahead of the year-end. LAF borrowing averaged INR
1trn during the current fortnight; however it was mainly skewed towards the first
week of the fortnight on expectation of an increase in the repo rate at the policy
meet on 17th March-11. Call rates are likely to hover in the 7.55%-7.65% range
due to the strong interbank demand towards the end of the financial year.
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