Markets Await Issuance Calendar

HSBC notes outperformance in Indian bonds, and says OMOs are key to direction, issuance calendar to be released at some point this week:

• "INR rates and Government Securities (Gsec) yields have continued to edge lower in March. There has been improvement in appetite at Gsec auctions with regular open market operations (OMOs) by the Reserve Bank of India (RBI). Moreover, the government also cancelled the INR200bn of Gsec auction last week given its large cash balances and stronger-than-expected revenue collections. The attention during the week will turn to the release of the government securities (Gsec) borrowing calendar for the first half of the fiscal year starting on 1 April. The rally in Gsec markets could extend somewhat further in the event the issuance is not frontloaded to 1H FY21/22. We however do not think that supply strains will completely recede even if the RBI chooses to plan only 50% of the INR12.1trn annual issuance in 1H FY21/22. This will still mean around INR240bn of supply at weekly auctions and will require the continuation of OMOs by the central bank. On OMOs, we highlight that the central bank has not yet announced any OMO for this week but it has launched special liquidity operations to provide liquidity to banks for year-end requirements. As such, an 11-day repo auction for an amount of INR250bn was conducted on 26 March and another 5-day repo auction for INR250bn will be conducted on 31 March. Moreover, INR2trn of 14-day reverse repo that matured on 26 March was not rolled over which should provide relief against the 50bp reversal in Cash Reserve Ratio that came into effect on 26 March."