Sentiment remains upbeat ahead of the new 10 year bond issue : Edelweiss,

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Government securities
 Sovereign bonds ended firm, with the 8.13% 2022 bond & the 8.08% 2022
gaining the most, as sentiment was boosted by the central bank’s decision to issue
a new ten year benchmark on Friday. GoI will begin its INR 4.17trn borrowing by
auctioning INR 40bn of a new seven year benchmark, INR 50bn of the new ten
year and INR 30bn of the 8.30% 2040 bond. The most liquid 8.13% 2022 bond
gained 3bps closing at 8.05% however the current ten year benchmark bond
remained the underperformer since it is likely to become illiquid once the new ten
year bond is traded.
Non-SLR market
 Short terms rates eased due to the lower demand for funds from banks. In March,
banks placed ~INR 780bn through CD issuances and the demand is relatively
lower at the start of the new financial year. Three month CDs was quoted at
8.50%-8.55% while three month CPs was quoted at 9.25%-9.35%. IOC placed
INR 7bn of June maturity CP at 7.91% while HPCL placed INR 8bn of June CP at
7.97%. NHB raised INR 9bn through issuance of June CP at 8%.
Money markets
 The central bank, for the first time since May-10, drained surplus of INR 425bn
through the reverse repo window. However this doesn’t reflect the correct liquidity
in the system. Banks have maintained an excess of 11% over the required CRR
(until 1st April) indicating the skewed borrowing towards the end of the last
financial year. The liquidity is likely to remain in the negative INR650bn-INR700bn
in the next fortnight once GoI kicks off its weekly auctions