Monday, December 7, 2009

[Investors] Global cues harden yields 6-7bps; fresh buying at ‘dips’ take yields lower


n               After release of the US employment data (unemployment growth down to 10%) which surprised the market by registering a better-than-expected performance, the bond market went for sell off as US treasuries rose to a high of 3.50%. The domestic debt market, factoring the development, opened on a pessimistic note with the liquid counters trading 5-7bps higher in early hours of trade.

n               The 10-year benchmark (6.90% 2019) yield surged to a 13-month high as it surpassed the psychological level of 7.50% to register an intra-day high of 7.57%. Losses for the day were pared by some buying enthusiasm at the oversold levels as the yield curve managed to close 5-10bps lower for the day.

n               As we approach the end of the calendar year, participants are gradually expected to switch positions from the present 10-year benchmark 6.90% 2019 to 6.35% 2020. This has resulted in continuous compression of spread; for the day the spread shrunk by 10bps to 9bps.

n               After a day of weak activity in the primary non-SLR segment, INR 35.30 bn worth CDs were issued. Concentrated in 3, 6, and 12-months maturities, CD rates for the day surged by 5-10bps.  Allahabad Bank was the biggest issuer for the day, mopping INR 9 bn from the system—accounting for 66% volumes in 3-month at 3.7% and 33% in the 6-month segment at 4.82%.

n               Liquidity for the day continued to be buoyant as INR 1.09 tn was parked in the overnight money market. With INR 776 bn lent in the CBLO segment, rates were suppressed to day's low of 0.25%; total quantum was lent at an average 2.58%. Reverse repo volumes slipped below the INR 1-tn mark which can be attributed to the higher CRR provision done by banks in the non-reporting week.

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