Weekly Market Review | srei

Weekly Market Review

December 5, 2014

Money Market 5-Dec-14 28-Nov-14
Call

8.00%

7.90%

CBLO 7.90% 7.95%
Mibor 8.05%* 8.02%
LAF o/s Repo (Rs Cr) 2,201 12,781

* Data as on December 4.

Benchmark Securities 26-Nov-14
Security Closing price Previous price Closing yield (%) Previous yield (%)
91 DTB 97.99 97.99 8.22 8.24
364 DTB 92.57 92.37 8.21 8.28
07.28%  2019 97.37 96.79 7.99 8.14
08.27%  2020 100.96 100.22 8.05 8.22
08.79%   2021 103.55 102.66 8.11 8.28
08.35%  2022 101.45 100.40 8.09 8.28
08.83%  2023 104.85 103.66 8.06 8.25
08.40%  2024 102.83 101.68 7.97 8.16
08.20%  2025 100.65 99.53 8.11 8.26
08.33%  2026 101.65 100.48 8.11 8.26
08.28%  2027 101.52 100.10 8.08 8.26
08.60%  2028 104.73 103.19 8.02 8.21
09.20%  2030 109.95 108.15 8.07 8.27
08.32%  2032 102.50 100.70 8.05 8.24
08.33%  2036 102.77 100.68 8.06 8.26
09.23%  2043 113.00 110.67 8.06 8.26

Data with two day lag

Liquidity conditions remained comfortable

Liquidity conditions remained comfortable through most of the week as banks had ample funds. The overnight borrowing rate ended at 8% on December 5 as against 7.80-7.90% on November 28. The overnight borrowing rate briefly rose at the start of the week as banks borrowed to pay for gilts purchased in the last week’s auction. Banks’ demand for funds in the last session of the week to make indirect tax payments also exerted upward pressure on the call money rate. Inflows from government spending and the RBI’s cash injections through its term repo auctions kept call rates from rising further. Noting the liquidity conditions, the RBI held reverse repo auctions on every day of the week.

Gilt prices rose on dovish policy announcement

Government bond prices strengthened significantly following the RBI’s monetary policy announcement on December 2, which participants perceived as dovish. The benchmark 8.40% 2024 paper ended at 7.94% yield on December 5 as against 8.09% yield on November 28. The central bank said that a change in the monetary policy stance is likely early next year, including outside the policy review cycle, if the current trend of declining inflation continues and if fiscal developments are encouraging. Strong demand for gilts at the weekly auction on December 5, absence of a gilt sale next week and low global crude oil prices further boosted bonds. The central bank’s OMO gilt sale earlier in the week had negligible impact owing to the bullish sentiment surrounding bonds.

Top 5 Traded Securities

ZCYC curve shifted downwards

ZCYC curveshifted downwards, with lower yields for papers across the maturity spectrum compared to last week’s curve.

ZCYC Curve

Source: NSE

AAA Corporate Bond Yields and Spread
  Yield Spread
  3-Dec 26-Nov 3-Dec 26-Nov
1 year 8.38 8.43 0.05 0.08
3 year 8.40 8.48 0.21 0.16
5 year 8.48 8.60 0.29 0.27
10 year 8.36 8.58 0.22 0.16

Data with two day lag

Government Borrowing Programme (Rs. Cr.)
Budgeted G-Sec Gross Borrowings for 2013-14 592000
Budgeted G-Sec Net Borrowings for 2012-13 465727
Budgeted Redemptions 126273
G-Sec Gross Borrowings till Date 483000
G-Sec Gross Borrowing Completed (%) 81.59%
Maturities till date 84464
Net G-Sec Borrowings till date 398536
364 Day T-Bill Gross Borrowings till date 105000
OMO Purchases till date 10345
SDL auction till date 135826

Term of the week

Dirty price It is the price of the bond including interest accruing on the next coupon payment. It represents the price an investor will pay to purchase the bond.

Saturday, December 6, 2014