Macro and Government Bond Commentary: Yields reverse early downside with paying in OIS, likely profit booking from PSU banks; liquidity deficit widens • 10Y benchmark (6.79 GS 2034) opened lower at 6.63% after the RBI announced a series of liquidity infusion measures (including OMO purchases in three tranches of INR 200bn each, 56-day VRR auction and a USD 5bn buy-sell swap). This downside in yields didn’t sustain, and profit booking from PSU banks was heard morning session onwards. With this extent of selling continuing in heavy volumes, yields continued higher. This upside in yields was also in sync with paying in OIS across the curve, which weighed heavily upon markets today (with real money participants/traders liquidating their receiving positions). The 10Y bond closed trade at 6.69% vs 6.68% prev. • As on 24th Jan, system liquidity deficit widened to INR 3.1tn likely (without adjusting for daily CRR imbalances)
