Strong demand to meet SLR requirement; 11 Yr bond ends at 8.01% :Edelweiss

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Strong demand to meet SLR requirement; 11 Yr bond ends at 8.01%
Government securities
 Sovereign bonds traded in a narrow range with the underlying sentiment boosted
by the lower than expected H1FY12 borrowing. On Friday, GoI announced its gross
borrowing plan of INR 2.50trn for Apr-11 to Sep-11. Majority of the borrowing
(74%) is in the less than 14Yr segment while 26% of the borrowing will be in the
longer maturity securities to serve the demand from insurance companies &
pension funds. The 11 Yr bond closed 1 basis lower at 8.01% with strong demand
from banks in order to meet their SLR of 24% towards the end of the financial
year
Non-SLR market
 Short term rates for value date in April fell by 100 bps to around 8.90% - 8.95%
as there is lower demand from banks to place CDs after March. Three month CDs
(March value date) quoted at 9.90%-9.95% while one year CDs were quoted at
9.95%-10.00%. IOB & Andhra Bank placed INR 15bn & INR 7bn of three month
CD at 8.95% while State Bank of Travancore placed INR 1bn of three month CD at
8.85%. Andhra Bank also placed INR 2.75bn of one year CD (March value) at
10.10% while Vijaya Bank placed INR 3.50bn of one year CD at 10.20%. Bank of
India placed INR 9bn of three month CD at 9.60% and INR 6bn of one year CD at
9.95%.
Money markets
 Call rates are likely to remain under pressure in this fortnight as the year end
approaches and banks refrain from the interbank lending. Banks that were keen on
borrowing preferred to use the CBLO window as the rates there were much lower.
The central bank infused INR 8.78bn through the LAF facility compared to INR
741bn on Friday