OMO expectations prop up gilts; Edelweiss,

OMO expectations prop up gilts; No announcement yet
• The markets were able to overcome the disappointment of unchanged rates as
expectations of an OMO this week helped gilts negate initial weakness and close the day
in the green. The fact that an OMO announcement has not come in yet as per usual
practice might result in negative sentiment for the rest of the week.
• The new 10-Y benchmark was the strongest of the lot as supply scarcity resulted in
position builders running up prices. The G-Sec closed the day at 8.11% vs 8.17%,
recovering almost half of the losses since policy announcement.
• The OIS market was comparatively quiet and has not yet seen as much of a pullback as
seen in the domestic bonds, though swap rates came off the day’s highs. Both the 1yr and
5yr OIS traded flat at 7.78-7.84% and 7.26-7.32% respectively.
Non-SLR Market
HDFC Bank placed Sep maturity CD worth INR 25.75bn at 9.47%. Canara Bank placed 3M
CDs worth INR 5bn at 9.47% and INR 2bn at 9.40%. Bank of Maharashtra placed Sep
maturity CD worth INR 6.5bn at 9.48%. Apollo Tyres placed 3M CP worth INR 1bn at 9.87%.
Tata Motors Finance placed 3M CP worth INR 1bn at 9.42%.
Money Market
Liquidity conditions tightened further and LAF borrowing surged to a 2-month high at INR
1.33tn – this might remain elevated till advance tax flows find their way back into the
system. Similarly call rates were at a 1-month high with the range widening to 8.00-8.35%
and the WAR for the day settling at 8.29% vs 8.15%.

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