Sentiment remains weak as tight liquidity weighs;: Edelweiss

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Sentiment remains weak as tight liquidity weighs
Government securities
 Sovereign yields traded in a narrow range, with a weak bias, amidst absence of
cues on liquidity from the central bank. Reserve Bank of India did not announce
any liquidity measures as anticipated by traders, notably open market operations,
in order to provide respite from the tightening liquidity situation. The 10 year
benchmark bond closed unchanged at 8.07% while the 7.17% 2015 bond which
will be see fresh supply on 19th Nov, closed 3 bps higher at 7.85%. Volumes
continued to remain muted at INR 63 bn on account of the uncertain liquidity
situation.


Non-SLR market
 Short term Non SLR yields inched higher taking cues from the tightened liquidity
situation. Andhra Bank placed INR 2.25 bn one year CD at 8.70% while
Corporation Bank placed INR 4.00 bn one year CD at 8.65%. Federal Bank placed
INR 1.75 bn three month CD at 8.18%.
Money markets
 Call rates ended firm at 6.81% today while the volume in money market continued
to be muted at the INR 550 bn level as banks preferred to borrow at central bank’s
repo window. Banks borrowed INR 994 bn at the LAF to meet up their reserve
requirement for the current fortnight. At the T-bill auction today, RBI set a cut off
yield off 6.81%, 4 bps higher, for 91 day T-bill while the cut off yield for the 364
day T-bill was set at 7.20% (13 bps higher than a fortnight earlier).
Swaps
 Swaps rates ended mostly unchanged from Monday because uncertainty over the
liquidity situation deterred participants from taking big positions. The one year
swap closed at 6.70%-674% levels while the five year swap ended at 7.25%-
7.29% levels