Bonds Gained Post-GSAP; Auction Eyed

Bonds gained yesterday after the RBI conducted its second GSAP operation for INR 350bn, the market was reassured that the bank bought a decent chunk of total purchases in the 10-year sector, buying INR 83.5bn of the 5.85% 2030 issue at 5.9526%, the 10-year is seen as the anchor point for the yield curve. The operation also bodes well for today's auction, with cut off yields well below prevailing market level demand is expected to be boosted.

• The RBI will today auction a total INR 320bn from the following lines:
  • INR 110bn 5.63% 2026 bonds
  • INR 40bn FRB 2033 bonds
  • INR 100bn 6.64% 2035 bonds
  • INR 70bn 6.67% 2050 bonds
• The RBI will also conduct 14-day variable rate reverse repo auction under LAF, details here
• Elsewhere India's coronavirus situation continues to be a cause of concern, The latest twist in the tale is a shortage of a crucial drug to treat an invasive fungal infection preying on patients with weakened immune systems. Despite this, and cases remaining close to 300k a day, Nomura sees early signs of stabilization. The bank says in a note that the pace of vaccinations will pick up from June, which alongside a resumption of portfolio inflows is a positive for INR.