FII debt limit auction likely in November end: Edelweiss

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FII debt limit auction likely in November end
Government securities
 Sovereign bond rose on supposition that the auction of the investment limit for FII
is likely to be announced by the end of the month. In September, the government
doubled the FII investment cap in government bonds to $10 bn with a condition
that the investment can be made in bonds with residual maturity over five years.
The benchmark 7.80% 2020 gained 5 bps closing at 8.02% while the 8.13% 2022
bond closed unchanged at 8.06%, touching an intraday low of 8.04%.


Non-SLR market
 Corporate bonds volumes saw sharp spike from INR 2 bn on Tuesday to INR 8.15
bn today on expectation that RBI will announce more measures to ease tightness
in liquidity.
 Banks mopped by INR 35 bn through issuance of Certificate of Deposits. State
Bank of Hyderabad placed INR 2.50 bn maturing on 18th Feb`11 at 8.05% while
Punjab National Bank placed INR 3 bn of similar maturity at 8.10%. Bank of India
placed INR 3.25 bn of 1 Yr CD at 8.70% and INR 2.50 bn of 22nd Feb `11 maturity
CD at 8.10%. Rural Electrification Corporation placed INR 2 bn CP at 8.05%
maturing on 22nd Feb `11.
Money markets
 LAF borrowing tapered off during the week as most banks have met the reserve
requirement for the reporting fortnight. At the dual LAF today, banks borrowed
INR 958 bn compared to last week average borrowing of INR 1187 bn. CBLO rates
ended unchanged at 6.24% , however volumes saw a marginal improvement to
INR 431 bn compared to INR 398 bn on Tuesday.
Swaps
 1 Yr Swaps rates remained firm at 6.70%, however the emerging view that RBI
will step in to ease the tightness in the liquidity may lead to a moderation in rates.
The 5 Yr swaps closed 4bps lower at 7.22%.