Gilts stay in tight range on OMO hopes
• The strong rally in the rupee to a 7-week high failed to have a meaningful impact on the
bond markets which have been keenly looking forward to OMO action this week. The
simultaneous rise in crude prices which are now close to the USD 100 mark could also be
a reason for the muted yield movement.
• The 10-Y benchmark had a flat opening and stuck to a narrow range of 8.15-8.18%, finally
ending the session at the day’s low of 8.18% vs 8.17%. Participants have built in high
hopes of an OMO this week given that last week’s auction outcome was disappointing
and the liquidity situation is also showing fresh signs of strain.
• The OIS market was relatively steady and rates were unchanged in spite of continued
uptick in risk assets. The 1-Y OIS ended the day at 7.80-7.87% vs 7.80-7.86%, while the 5-Y
OIS ended at 7.21-7.27% vs 7.22-7.28%.
Non-SLR Market
BPCL placed September Maturity CP worth INR 5bn @ 8.95%. IOCL placed 1M CP worth INR
15bn @ 8.78%. SBT placed September Maturity CD worth INR 1bn @ 8.80%. CBI placed 3M
CD worth INR 3.5bn @ 9.15%. REC placed 6M CP worth INR 9bn @ 9.25%.
Money Market
Borrowing at the LAF window went a notch higher to INR 979bn probably under the stress
emerging from lack of OMO support last week. Call rates which shot up to 8.34% last week
softened considerably but are still at high levels of 8.21%.
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