The Indian bond market saw yet another close of an action-packed week on Friday amid the Reserve Bank of India’s (RBI) push to curb retail inflation and clues from the US Fed that it is prepared to raise the interest rates further to control price rise.
“System liquidity went on to negative territory during the middle of this week post-introduction of I-CRR. RBI’s MPC has reiterated in their minutes that they will have to keep the liquidity under check to curb inflation. Some segment of the market predicts that the I-CRR may get extended at least partially beyond the review date,” says Venkatakrishnan Srinivasan, founder of Rockfort Fincap LLP, a financial advisory firm.
RBI Governor Shaktikanta Das, in the MPC minutes, mentioned that “The Reserve Bank’s liquidity management has been nimble and two-sided as per requirement. We will manage the liquidity overhang proactively using the various instruments at our command while ensuring that the banking system has adequate liquidity to meet the productive requirements of the economy.”
Meanwhile, RBI has announced its weekly auction of treasury bills (T-Bills) and state development loans (SDLs). The indicative yield for three-month, six-month, and 364-day T-bills are 6.81 per cent, 7.01 per cent, and 7.02 per cent, respectively.
This time, West Bengal, Andhra Pradesh, Bihar, Goa, Tamil Nadu, Kerala, Rajasthan, and Haryana have announced participation in SDL auctions. Tamil Nadu and West Bengal are offering the highest interest rates at 7.62 per cent and 7.49 per cent, respectively, for SDLs.
As per Rockfort data, the state governments have offered to sell SDLs worth Rs 15,900 crore on August 29, as against the scheduled SDL calendar of market borrowing of Rs 29,100 crore. The state governments, it said, continue to borrow much lower than the scheduled borrowing amount.
“India’s money market rates continue to be on the higher side this week due to tightened liquidity in the banking system, with many Indian banks rushing to raise CDs from the market. However, the 10-year government bond remained largely flat and closed at 7.20 per cent on Friday evening without any change in levels compared to the previous week’s closing. We expect the 10-year G-Sec to continue to trade within a short range next week,” says Srinivasan.
Corporate Bond Market Updates:
This week, bond issuers such as PFC, PGC, MTNL, Embassy ReIT, India Grid Trust, Delhi International Airport, LIC HF, NIIF Infrastructure Finance, Phoenix ARC, and Fincare Small Finance Bank have tapped the bond market. Srinivasan says large investors continue to show a huge appetite for long-term bond issuances.
Next week, the Central Bank of India plans to launch its Tier 2 subordinated bond issuance. Tata Communications is also gearing up to launch its 3-year tenor NCD issuance.
Meanwhile, on Friday evening, the Securities and Exchange Board of India (Sebi) released a consultation paper on the association of Sebi-registered intermediaries and regulated entities with unregistered entities, including finfluencers.