Optimism due to announced FII limits auction ; Edelweiss

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Optimism due to announced FII limits auction ; ten year benchmark closes at 7.97%

Government securities
 Sovereign bonds traded were positive today, with yields closing lower by 4bps with high
volumes. The benchmark 10 Yr bond closed 4 basis points lower at 7.97% with the total
volumes on the central banks trading platform at INR 19.65bn level. The 7.99 GOI 2017 bond
closed at 7.91%.
 The optimism was generated on the view that a step up of FII debt investment limits might
prop up demand for government securities. SEBI announced that the auction will take place on
December 2nd for the unused as well as the incremental investment limits on a first come first
serve basis.

 There will be 3 categories under which the limits will be auctioned. Each single entity can bid
for a maximum limit of 2000 Crore each under the incremental (new) limits of Government
and Corporate and 600 Crores under the old corporate limits.
 In Global markets there were reports of ECB buying Portuguese government bonds today.
Portuguese bonds had slumped for 6 consecutive weeks but rose today from declines. The 10
year note was down 2 bps @ 7.23%. The Irish 10 year government note was @ 9.33%
Non-SLR market
 Canara Bank placed INR 10bn 90 day CDs at 8.42%, State bank of Hyderabad placed INR 5bn
of 90 day CDs at 8.40%, Bank of Baroda raised INR 5bn of 90 day CD at 9%. Federal Bank
raised INR 2bn of 1yr CD at 9%. IDFC raised INR 2bn of 10yr bond at 8.89%.
Money markets
 Call rates and CBLO rates closed lower today at 6.81% and 6.23% respectively as demand for
liquidity cooled off. Banks borrowed INR 1.05tn via the repo auction.
 The demand for liquidity tapered off as most banks already met with their reserve
requirements earlier in the week. However, the call rate still stays above the repo rate of
6.25%, signifying tight liquidity in the system.
Swaps
 The swap rate curve retained the same shape as there was a lack of any specific triggers
across tenures. One year swap closed flat at 6.79% while the five year swap closed 1bp higher
at 7.25%.