[Investors Please Listen] Edel Daily Debt - Sovereign yields upbeat as market smells rate cut; old benchmark down 13bps

"Daily Debt Report"

 

Sovereign yields upbeat as market smells rate cut; old benchmark down 13bps

n               The government bond prices pleasantly rose today as rate cut sentiments of the market heightened after a probable action by the apex bank with the close of the 14^th and the final Lok Sabha session. The old benchmark bond travelled south by a whopping 16bps from days' high to low of 6.49%, closing only 2bps higher.

n               The new 10-year paper (6.25% GoI 2019) on the other hand has been markedly sticky, softening only 5bps to close at 6.13%. The spread between the old and the new benchmark has subsequently eased ~10bps, to 38bps, as participants huddle their bids for the most liquid 8.24% 2018 counter.        

n               Cash availability seemed to have enhanced in the system, reflected both in the money market and reverse repo volumes; the latter standing at INR 693 bn. Average overnight rate was 20bps less than the 4% reverse repo rate, while the cheapest interbank borrowing was done at 2-2.5%.    

n               Annual inflation for week ended February 14 eased 56bps from the previous week, holding at 3.36%. The price index for food products and chemical and chemical products (within the major manufacturing products group) led the decline, easing 0.3% and 1.4%, respectively. 

n               Yields on the 5 and 10-year corporate papers trailed softer in repose to the easing sovereign yields, both declining by 10-15bps to close at 8.65% and 9.17% respectively.

 

Highlights of the day   

Dearness allowance of 6% has been approved by the Lok Sabha for central government employees. This would cost the government, revenues worth INR 35 bn which if considered a part of the 3^rd stimulus package would pull the deficit by nearly INR 340 bn.

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