Macro and Government Bond Commentary: Yields reverse early upside, INR slips to fresh all-time low of 85.80 • 10Y benchmark (7.10 GS 2034) opened little changed at 6.81% in absence of fresh cues overnight. Yields edged higher early in the afternoon tracking a rapid depreciation in INR (brought about by the stronger USD, weakness in South Korean Won, and month end importers’ demand in a thin volume trade). Spot INR edged up to 85.80, with stop loss triggered at 85.50. However, further upside in spot INR was limited on anecdotes of RBI intervention. The 10Y point partly reversed early upside to close trade at 6.82%. • RBI set the coupon for new GS 2031 at 6.79% for INR 100bn, sold 6.92 GS 2039 at 6.90% for INR 120bn, and 7.09 GS 2054 at 7.06% for INR 100bn. • As on 26th Dec, system liquidity deficit narrowed to INR 1.89tn (without adjusting for daily CRR imbalances).
