Call rates may remain steady, Re seen holding strong
Call rates ended in a stable range of 6-6.1% supported by comfortable liquidity. Comfortable liquidity was indicated by the bids received at the LAF auctions.
Call rates ended in a stable range of 6-6.1% supported by comfortable liquidity. Comfortable liquidity was indicated by the bids received at the LAF auctions. At the end of the week, 23 bids for a total Rs 35,090 crore were received for reverse repos.
Tax outflows are expected in the middle of the month but traders expect those to be absorbed by prevailing liquidity. Redemption and coupon payments would also help. The cumulative CBLO volumes for the week were Rs 175,356 crore from Rs 168,829 crore. The overnight weighted average yield was at 5.8817% against 5.8512% in the previous week. Call rates are expected to remain steady for the time being.
GILTS MARKET
Risk-free yields stuck in narrow range amidst moderate to thin activity. Yield of the 7.99% GOI 2017 bond ended on a positive note at 7.87% boosted by liquidity and benign inflation. Yield of the 7.49% GOI 2017 bond too hovered in a narrow range of 7.90-92%. The WPI inflation rate at a 16 month low of 3.79% Y-o-Y helped to overshadow any concerns arising out of high crude oil prices. RBI set higher-than-expected cut-off price of Rs 100.35 (yield 8.15%) at the 8.20% GOI 2022 bond auction.
The cut-off for the 8.33% GOI 2036 was much in line with expectations at Rs 99.13 (8.41%). Meanwhile, RBI governor YV Reddy said that the bank would be vigilant and proactive in responding to any rise in global uncertainties that could threaten growth and stability in the local economy. The gilt market would look forward to the week, with positive sentiment on back of adequate liquidity and benign inflationary conditions. However, flows would be watched with advance tax outflows round the corner.
CORPORATE BONDS
The corporate bond market sentiment was subdued. The secondary market activity dipped in line with the trend of the GOI bond market. However, unlike the risk-free bonds, corporate bond yields rose leading to a widening in spreads. Only towards the end of the week, mild trading interest appeared.
AAA 5-year yield moved in a narrow range to close almost flat at 9.63% from 9.60%. Spreads over comparable GOI paper, too, remained unchanged at 165 bps. Meanwhile, in the primary market, the current comfortable liquidity conditions appeared to be prompting issuers to line up with issues. Coupon rates, however, appeared to be as much as 60 bps above the previous offering. From the local liquidity perspective, there is little boost likely to emerge for bonds.
Commercial Paper
T-bills and bond auction sailed smoothly due to comfortable liquidity keeping short-term rates relatively steady. Reference P1+ CP eased to 8.28% from 8.40% before a short dip to 8.14% intra-week.
At the 91-day T-bill auction, the cut-off price was set at Rs 98.27 (7.06%) from Rs 98.26 (7.10%). The 182-day cut-off price was marginally higher at Rs 96.44 (7.40%) from Rs 93.41 (7.47%).
FOREX
The week is likely to start choppy as markets await fresh leads after a drastic change in scenario, following US jobs data last week. The rupee is still expected to outperform other Asian currencies.
Credence Analytics India Pvt Ltd
Tax outflows are expected in the middle of the month but traders expect those to be absorbed by prevailing liquidity. Redemption and coupon payments would also help. The cumulative CBLO volumes for the week were Rs 175,356 crore from Rs 168,829 crore. The overnight weighted average yield was at 5.8817% against 5.8512% in the previous week. Call rates are expected to remain steady for the time being.
GILTS MARKET
Risk-free yields stuck in narrow range amidst moderate to thin activity. Yield of the 7.99% GOI 2017 bond ended on a positive note at 7.87% boosted by liquidity and benign inflation. Yield of the 7.49% GOI 2017 bond too hovered in a narrow range of 7.90-92%. The WPI inflation rate at a 16 month low of 3.79% Y-o-Y helped to overshadow any concerns arising out of high crude oil prices. RBI set higher-than-expected cut-off price of Rs 100.35 (yield 8.15%) at the 8.20% GOI 2022 bond auction.
The cut-off for the 8.33% GOI 2036 was much in line with expectations at Rs 99.13 (8.41%). Meanwhile, RBI governor YV Reddy said that the bank would be vigilant and proactive in responding to any rise in global uncertainties that could threaten growth and stability in the local economy. The gilt market would look forward to the week, with positive sentiment on back of adequate liquidity and benign inflationary conditions. However, flows would be watched with advance tax outflows round the corner.
CORPORATE BONDS
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The corporate bond market sentiment was subdued. The secondary market activity dipped in line with the trend of the GOI bond market. However, unlike the risk-free bonds, corporate bond yields rose leading to a widening in spreads. Only towards the end of the week, mild trading interest appeared.
AAA 5-year yield moved in a narrow range to close almost flat at 9.63% from 9.60%. Spreads over comparable GOI paper, too, remained unchanged at 165 bps. Meanwhile, in the primary market, the current comfortable liquidity conditions appeared to be prompting issuers to line up with issues. Coupon rates, however, appeared to be as much as 60 bps above the previous offering. From the local liquidity perspective, there is little boost likely to emerge for bonds.
Commercial Paper
T-bills and bond auction sailed smoothly due to comfortable liquidity keeping short-term rates relatively steady. Reference P1+ CP eased to 8.28% from 8.40% before a short dip to 8.14% intra-week.
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At the 91-day T-bill auction, the cut-off price was set at Rs 98.27 (7.06%) from Rs 98.26 (7.10%). The 182-day cut-off price was marginally higher at Rs 96.44 (7.40%) from Rs 93.41 (7.47%).
FOREX
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Overcoming a weak first half of the week, the rupee appreciated 20 paise to 40.69/$. The unit touched a high of 40.68/$ after a gap 3-weeks on Friday. Earlier, the rupee slipped towards 41/$, missing the figure by a paisa while uncertainty existed over global investment flows. The rupee, however, was displaying resilience despite sporadic selling in stocks and quickly rebounded when a batch of fresh inflows hit the market. FIIs were net buyers of $707 million worth Indian equities in September.The week is likely to start choppy as markets await fresh leads after a drastic change in scenario, following US jobs data last week. The rupee is still expected to outperform other Asian currencies.
Credence Analytics India Pvt Ltd
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