Modest gains for sovereign bonds; volumes remain muted :: Edelweiss

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Modest gains for sovereign bonds; volumes remain muted
Government securities
 Sovereign bonds closed with modest gains today as banks bought specific
securities to boost their portfolio valuations on the last day of the financial year.
Sentiment was also supported by a marginal decline in the weekly inflation
reading. Primary articles inflation declined to 12.98% in the week ending 19th Mar
from 13.53% a week ago. In the same week, food articles inflation slowed to
9.50% from 10.05% a week ago. The most actively traded 8.13% 2022 bond saw
some selling pressure on anticipation of fresh supply in the auction next week,
closing 2bps higher at 8.09%.
 Swap rates remained firm since despite a slowed down in the inflation reading, as
concerns of a sharp rise in the manufacturing inflation continuous to persist. The
five year swap closed 3bps higher at 7.97% while the one year swap closed 1
basis lower at 7.41%.
Non-SLR market
 Short term rates fell drastically, due to the low supply from banks, as most of the
value dates would be beyond 31st March. Three month CDs were quoted at 9.25%
- 9.30% while one year CDs were quoted at 9.35% - 9.45%. PNB placed INR
2.75bn of June maturity CD at 9.48% and INR 7.50bn of July maturity CD (April
Value) at 8.70%. IDBI Bank placed INR 5bn of July maturity CD at 8.75% for a
quantum of INR 5bn. IOC raised INR 5bn of June maturity CP at 8.14%.
Money markets
 Call rates rose sharply as banks were reluctant to lend due to the end of the
financial year. Five-day call rates ended at 9.00%-9.25% compared with one day
borrowing of 7.20%- 7.25%. In order to meet the reserve requirement, banks
borrowed heavily at the LAF window. The central banks injected INR 1trn at the
LAF compared to INR869bn on Wednesday.