Thursday, May 14, 2009

[Investors Please Listen] Bond yields come off by market close; benchmark down by 9bps!

Bond yields come off by market close; benchmark down by 9bps

n               The government bond market witnessed cautious buying prior to exit poll results. The benchmark, which opened in the red to plot intraday high of 6.46%, witnessed subdued buying pressure as it posted intraday low of 6.32% before closing at the same (9bps below the previous close).

n               Despite bond prices closing in the green for the day, the sovereign bond traded volumes continue to hover at 1.5 month low;  total volumes were INR 73.7 bn, of which 54% was concentrated in 10-year.

n               The INR 70 bn T-bill auction sailed smoothly. The 3-month cut off came in higher than its previous cut-off at 3.27%, while 6-month was at 3.489%; the auction cherished a bid-to-cover ratio of 3.17 times.

n               Trailing the path paved by the PFC issue, REC is slated to raise funds in the 3 and 5-year segments. With borrowing costs of 6.95% and 7.65%, the market response is lackluster as it anticipated pricing (yields) 10-15bps higher than what the issuer is offering. The bidding bias is likely to be in short maturing paper (3-year). If the benchmark rallies by another 10bps, then it is expected to draw bidding interest.

n               Liquidity in the system continues to be abundant as INR 1.3 tn was parked in reverse repo (highest in non-reporting week). The overnight money market replicated yesterday's numbers as INR 881 bn was lent at a weighted average rate of 2.54%.

n               Primary dealers continue to witness dipping underwriting commissions as plush liquidity shrinks the probability of auction devolvement; commission for new 5-year being 1.63 paisa and 5.21 paisa for 8.20% GoI 2022.

 

 


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