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FII limits auction announcement brings cheer to bond market
Government securities
Sovereign bonds saw a sharp rise towards the end of trade after SEBI announced
that it would allocate unused investment limits for foreign institutional investors
through a bidding process on 15th Mar-11. Currently the investment limit for FIIs in
government bonds is $15bn and in corporate bonds is $20bn. In the Union Budget
for FY12, the government increased the investment limit for corporate bonds to
$40bn from the existing $20bn. Total outstanding investment by FIIs in debt
securities stood at $20.40bn as on 7th Mar-11. The 7.99% 2017 bond closed with
maximum gains (down 7bps) at 7.92%, since its will be the most eligible bond to
be bought by FIIs with the sovereign limits auctioned (residual maturity of more
than five years)
The sentiment was also boosted since GoI did not announce any auction for this
week post market hours on Monday. The actively traded 8.13% 2022 bond closed
4bps lower at 8.04% while the ten year benchmark bond closed at 7.96%. Swap
rates also corrected sharply as traders preferred to receive fixed rates taking cues
from the decline in the sovereign yields. Although the movement of crude oil prices
continues to be concerns, positive sentiment in the domestic market led to a sharp
decline in swap rates across maturities. One year swap closed 6bps lower at
7.37% while the five year swap closed 11bps lower at 7.94%.
Non-SLR market
CD issuances continued to rise today due to the slight fall in the short term rates
since the improvement in the liquidity last week. Banks mopped up around INR
70bn as against INR 33bn on Monday.
One year CDs were quoted at 10.08%-10.15% while the three month CDs were
quoted at 10.00%-10.05%. Canara Bank and OBC placed INR 10bn & INR 5.25bn
of three month CD at 10.05% while Corporation Bank placed INR 6.50bn of 13th
June maturity CD at 10.03%. Axis Bank placed INR 10bn of 29th June maturity CD
at 10.18% and INR 5bn of one year CD at 10.22%.
Money markets
Improvement in the liquidity is evident from decline in the bids received by RBI at
the LAF window. Banks borrowed only INR 565bn today compared to an average of
INR 770bn last week. Banks and corporate are expected to pay INR 400bn – INR
500bn in mid March towards advance tax for the fourth quarter which will be put
some pressure on the overnight rates. Call rates eased marginally to 6.88% while
CBLO rates hovered around the central bank’s lending rate.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
FII limits auction announcement brings cheer to bond market
Government securities
Sovereign bonds saw a sharp rise towards the end of trade after SEBI announced
that it would allocate unused investment limits for foreign institutional investors
through a bidding process on 15th Mar-11. Currently the investment limit for FIIs in
government bonds is $15bn and in corporate bonds is $20bn. In the Union Budget
for FY12, the government increased the investment limit for corporate bonds to
$40bn from the existing $20bn. Total outstanding investment by FIIs in debt
securities stood at $20.40bn as on 7th Mar-11. The 7.99% 2017 bond closed with
maximum gains (down 7bps) at 7.92%, since its will be the most eligible bond to
be bought by FIIs with the sovereign limits auctioned (residual maturity of more
than five years)
The sentiment was also boosted since GoI did not announce any auction for this
week post market hours on Monday. The actively traded 8.13% 2022 bond closed
4bps lower at 8.04% while the ten year benchmark bond closed at 7.96%. Swap
rates also corrected sharply as traders preferred to receive fixed rates taking cues
from the decline in the sovereign yields. Although the movement of crude oil prices
continues to be concerns, positive sentiment in the domestic market led to a sharp
decline in swap rates across maturities. One year swap closed 6bps lower at
7.37% while the five year swap closed 11bps lower at 7.94%.
Non-SLR market
CD issuances continued to rise today due to the slight fall in the short term rates
since the improvement in the liquidity last week. Banks mopped up around INR
70bn as against INR 33bn on Monday.
One year CDs were quoted at 10.08%-10.15% while the three month CDs were
quoted at 10.00%-10.05%. Canara Bank and OBC placed INR 10bn & INR 5.25bn
of three month CD at 10.05% while Corporation Bank placed INR 6.50bn of 13th
June maturity CD at 10.03%. Axis Bank placed INR 10bn of 29th June maturity CD
at 10.18% and INR 5bn of one year CD at 10.22%.
Money markets
Improvement in the liquidity is evident from decline in the bids received by RBI at
the LAF window. Banks borrowed only INR 565bn today compared to an average of
INR 770bn last week. Banks and corporate are expected to pay INR 400bn – INR
500bn in mid March towards advance tax for the fourth quarter which will be put
some pressure on the overnight rates. Call rates eased marginally to 6.88% while
CBLO rates hovered around the central bank’s lending rate.
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