Yields shoot up on front-loaded H1 FY13 borrowing calendar •Edelweiss

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Yields shoot up on front-loaded H1 FY13 borrowing calendar
• The RBI released the H1 FY13 borrowing calendar late last evening. According to the
calendar, the government would be borrowing INR 3.7tn in the first half of the financial
year which is 65% of the gross budgeted plan. This is at the upper end of expectations
(60-65%), thereby making it a heavy borrowing schedule.
• With this much awaited release, the G-sec opened almost 10bps higher. It touched an
intra-day high of 8.63% as upward pressure sustained throughout the day. The 10-y G-sec
closed the day at 8.62% vs 8.50%.
• The G-sec is expected to trade weak in the coming days as the RBI kicks off the auctions
with INR 180bn worth of securities being auctioned next week. However, next week’s
auction will find support in the form of reinvestment demand as INR 260bn worth of Gsecs
come up for redemption on 5th April.
• The OIS market replicated the movement of the yields at the longer end with 5Y OIS
closing the day at 7.57-7.63% vs 7.52-7.58%. On the other hand, the shorter end was
mostly stable and ended at 8.09-8.15% vs 8.10-8.16%.
Non-SLR Market
Allahabad Bank placed 3M CD worth INR 5bn @ 10.75%. UCO Bank placed same tenor @
10.68% for INR 3bn. Andhra Bank placed 1Y CD worth INR 5bn @ 10.30%.
Money Market
Borrowings at the LAF window fell further to INR 1.64tn, possibly as advance tax flows find
their way back into the system. The call rates were on the higher side today and the range
was narrower at 8.80-9.55%. Overnight borrowing WAR was at 9.47% vs 9.44%.