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Weak IIP data raises rate cut probability; Spurs Gilts to greater heights
• The IIP data continued to diverge from the consensus with February growth coming in
lower at 4.1% YoY versus consensus estimates of 6.6%. The volatility in this indicator
proved further baffling as the January reading was revised steeply lower to 1.1% from the
earlier positive surprise of 6.8%.
• The bond markets have been rallying of late in expectation of rate cuts and this view has
been reinforced with the IIP downtrend – the RBI is very likely to regard this as evidence
of slowing growth, in spite of the recent volatility. The momentum which could have
been arrested if IIP emerged stronger has in fact been accelerated with the Jan revision.
• The 10-Y G-Sec traded steady around yesterday’s levels prior to the IIP release and yields
reacted immediately to the weak growth touching intra-day lows of 8.41%. The
benchmark ended the day at 8.44% vs 8.55%. Gilts are expected to remain buoyant in the
run up to the policy though the rally might lose steam as we have already gained more
than 30 bps over 5 sessions.
• The OIS market was once again neutral to domestic events, probably as a result of risk
trades re-emerging. The 1-y OIS ended at 7.94-8.00% vs 7.96-8.02%, while the 5-y OIS
closed at 7.51-7.57% vs 7.50-7.58%.
Non-SLR Market
IOCL placed June maturity CP worth INR 3bn @ 9.50%. HDFC Limited placed same tenor @
9.60% for INR 5bn. NHB also placed June maturity CP worth INR 12.5bn @ 9.58%. SBBJ
placed 3M CD worth INR 5bn @ 9.75%.
Money Market
Liquidity stayed in the comfort zone as LAF borrowing was at similar level of INR 865bn. Call
rates are now just 30 bps away from the repo rate, with deals being closed below the repo
rate as well. Overnight WAR for the day was at 8.80% vs 8.93%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Weak IIP data raises rate cut probability; Spurs Gilts to greater heights
• The IIP data continued to diverge from the consensus with February growth coming in
lower at 4.1% YoY versus consensus estimates of 6.6%. The volatility in this indicator
proved further baffling as the January reading was revised steeply lower to 1.1% from the
earlier positive surprise of 6.8%.
• The bond markets have been rallying of late in expectation of rate cuts and this view has
been reinforced with the IIP downtrend – the RBI is very likely to regard this as evidence
of slowing growth, in spite of the recent volatility. The momentum which could have
been arrested if IIP emerged stronger has in fact been accelerated with the Jan revision.
• The 10-Y G-Sec traded steady around yesterday’s levels prior to the IIP release and yields
reacted immediately to the weak growth touching intra-day lows of 8.41%. The
benchmark ended the day at 8.44% vs 8.55%. Gilts are expected to remain buoyant in the
run up to the policy though the rally might lose steam as we have already gained more
than 30 bps over 5 sessions.
• The OIS market was once again neutral to domestic events, probably as a result of risk
trades re-emerging. The 1-y OIS ended at 7.94-8.00% vs 7.96-8.02%, while the 5-y OIS
closed at 7.51-7.57% vs 7.50-7.58%.
Non-SLR Market
IOCL placed June maturity CP worth INR 3bn @ 9.50%. HDFC Limited placed same tenor @
9.60% for INR 5bn. NHB also placed June maturity CP worth INR 12.5bn @ 9.58%. SBBJ
placed 3M CD worth INR 5bn @ 9.75%.
Money Market
Liquidity stayed in the comfort zone as LAF borrowing was at similar level of INR 865bn. Call
rates are now just 30 bps away from the repo rate, with deals being closed below the repo
rate as well. Overnight WAR for the day was at 8.80% vs 8.93%.
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