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Lower net government borrowing brings cheers to bond yields
Government securities
Sovereign bonds witnessed a sharp rally today as a lower than expected net
market borrowing targeted by GoI in FY12 boosted sentiment. GoI will borrow INR
3.43trn from the market on a net basis during the next fiscal year compared with
INR 3.45trn in the current year. The fiscal gap is pegged at 4.60% of the gross
domestic product for FY12 against a market expectation of 4.80%. In order to
improve inflow in the corporate bond market, GoI has doubled the FII investment
limits in debt to $40bn. The most liquid 8.13% 2022 bond closed 5bps lower at
8.09% (touching a 8 week low intraday) while the benchmark 10 year bond closed
at 8.01%, down 6bps from Friday’s close.
Swap rates eased across maturities owing to the comfort drawn from the lower
fiscal deficit number. Although swap rates eased between 2-4bps today, concerns
about the food inflation continues to keep the spread negative. One year swap
closed 2bps lower at 7.49% while the five year swap closed at 8.11%, down 4bps
from previous close.
Non-SLR market
Corporate bond yield closed 5-8bps lower tracking the fall in the sovereign yields.
PFCs three year bond were quoted at 9.38%-9.42% while its five year bonds were
quoted at 9.28%-9.32%. Short terms rates eased only marginally relative to the
longer end of the curve owing to the strong CDs issuance from banks in order to
beef up their balance sheets. Banks mopped up INR 35bn through CD issuance.
Corporation Bank placed INR 3bn of 1st Jun maturity CD at 10.10% and INR 5bn of
15th Jun maturity CD at 10.12%. State Bank of Hyderabad placed INR 3bn of one
year CD at 10.15% while UBI placed INR 1.75bn of same maturity CD at 10.19%.
Money markets
Demand for funds remained strong at the being of the new fortnightly reporting
cycle reflective in the robust borrowing at the LAF window. Banks borrowed INR
808bn at the LAF today compared to INR 835bn on Friday. Call rate ended at
6.94% while the CBLO rate closed at 6.49%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lower net government borrowing brings cheers to bond yields
Government securities
Sovereign bonds witnessed a sharp rally today as a lower than expected net
market borrowing targeted by GoI in FY12 boosted sentiment. GoI will borrow INR
3.43trn from the market on a net basis during the next fiscal year compared with
INR 3.45trn in the current year. The fiscal gap is pegged at 4.60% of the gross
domestic product for FY12 against a market expectation of 4.80%. In order to
improve inflow in the corporate bond market, GoI has doubled the FII investment
limits in debt to $40bn. The most liquid 8.13% 2022 bond closed 5bps lower at
8.09% (touching a 8 week low intraday) while the benchmark 10 year bond closed
at 8.01%, down 6bps from Friday’s close.
Swap rates eased across maturities owing to the comfort drawn from the lower
fiscal deficit number. Although swap rates eased between 2-4bps today, concerns
about the food inflation continues to keep the spread negative. One year swap
closed 2bps lower at 7.49% while the five year swap closed at 8.11%, down 4bps
from previous close.
Non-SLR market
Corporate bond yield closed 5-8bps lower tracking the fall in the sovereign yields.
PFCs three year bond were quoted at 9.38%-9.42% while its five year bonds were
quoted at 9.28%-9.32%. Short terms rates eased only marginally relative to the
longer end of the curve owing to the strong CDs issuance from banks in order to
beef up their balance sheets. Banks mopped up INR 35bn through CD issuance.
Corporation Bank placed INR 3bn of 1st Jun maturity CD at 10.10% and INR 5bn of
15th Jun maturity CD at 10.12%. State Bank of Hyderabad placed INR 3bn of one
year CD at 10.15% while UBI placed INR 1.75bn of same maturity CD at 10.19%.
Money markets
Demand for funds remained strong at the being of the new fortnightly reporting
cycle reflective in the robust borrowing at the LAF window. Banks borrowed INR
808bn at the LAF today compared to INR 835bn on Friday. Call rate ended at
6.94% while the CBLO rate closed at 6.49%.
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