Tap Of New 10-Year Awaited

Bonds gained yesterday after RBI Governor Das reassured markets of the RBI's dovish intentions despite overshooting inflation. He noted that the Bank was monitoring the inflation situation and that price growth should slow in Q3. He said growth was the main focus and inflation was just a transitory hump. Das also confirmed that the GSAP operations were targeting the belly of the curve in the 6- to 12-Year maturities. Also supporting bonds was the GSAP operation, the operation went down smoothly and the Bank bought INR 200bn from the lines states with the majority of purchases coming from the 7.57% 2033 (INR 58bn) and 7.17% 2028 (INR 49.7bn) lines.

• Focus today will be on the INR 260bn auctions with markets watching to see the result of the first tap of a new 10-year line, the RBI will sell:
  • INR 30bn 4.26% 2023 (last sold on 25 June, yield: 4.2689%)
  • INR 140bn New 2031 bonds (current 10-year yield closed at 6.121% yesterday, benchmark coupon set at 5.85%)
  • INR 90bn 6.76% 2061 bonds (last sold on June 25, yield: 7.0961%)
• Elsewhere India has approved an INR 230bn coronavirus emergency response fund to be deployed by March in order to provide support to central government hospitals, agencies and state governments.