Re: Daily Debt - Sovereign yields rebound yet again after Friday's gains

"Daily Debt Report"

 

Sovereign yields rebound yet again after Friday's gains    

n         Government bond yields retraced by 10-15bps across the yield curve after opening at nearly previous close. The old benchmark paper (8.24% GoI 2018), after touching an intra-day low of 6.13% in the volatile first hour of trade, rode higher after noon, as participants looked to book some gains on the back of previous week's upbeat close. It closed for the day at 6.33% (up 20bps from low).

n         The new 10-year bond too registered a similar sentiment as it trailed 15bps higher from the day's low of 5.70% to close at 5.85%. The spread between the old and new 10-year bonds remained unchanged at 48bps.

n         Liquidity was undeterred as the week resumed with an average overnight rate of 3.81% (nearly 20bps below the reverse repo level). Excess cash parked under LAF reverse repo stood at INR 452.35 bn. Mutual funds were replete with cash as indicated by ~INR 450 bn under CBLO and absence of bids under special repo.   

n         The Central Statistical Organization released advanced estimates of the GDP at constant prices, expected to grow by a subdued 7.1% for FY09 relative to the previous 9% level. The 7% plus estimates have been possible due to growth of over 5% in sectors such as construction, financing, insurance, real estate, etc.

n         Non-SLR market (that witnessed an upbeat morning session) reacted to the hardening sovereign yield curve in a likewise manner; PFC's five-year paper that reported softer bids at 8.85% closed at 8.90%. The spread of the 10-year over 5-year has widened since beginning of February from 10bps to 22bps.

 

Highlights of the day   

n   Foreign banks swapped investor interest with public banks (much like Friday), as they purchased a net stock worth INR 3.4 bn while the latter sold stock worth INR 3 bn in the government bond segment.   

n   National Capital region planning board is scheduled to open a bond issue tomorrow at coupon rate of 9.15% in the 10-year maturity with a put-call option after 7 years. The issue has been rated LAAA by CRISIL and ICRA.