Macro and Government Bond Commentary: Yields rise following higher than anticipated Q4 SDL supply, liquidity deficit set to narrow with continued drawdown in GOI cash balances • 10Y benchmark (7.10 GS 2034) opened mildly higher following higher than anticipated SDL supply in the Jan-Mar quarter (at INR 4.73tn vs INR 4.3tn expected). Yields were ranged through the day, with most global markets closed for the New Year festivities. The 10Y point closed trade at 6.81% vs 6.79% prev. • T-bill auction results: RBI offered 91-days T-bills at 6.59% for INR 120bn, 182- days T-bills at 6.72% for INR 80bn, and 364-days T-bills at 6.69% for INR 80bn. • As on 31st Dec, system liquidity deficit was at INR 1.32tn (without adjusting for daily CRR imbalances). Conditions should improve from this point on month-end GOI spending (as witnessed from a continued fall in GOI cash balances with the RBI at INR 500.04bn vs INR 832.38bn previous).
