• The 10-year benchmark government bond (6.48% GS 2035) opened 1bp higher at 7.14% tracking the rise in Brent crude oil prices after US Trump issued another threat to Iran, in a social media post, saying Iran has 48 hours left to "make a deal" or "open up the Strait of Hormuz." • Over the day, the 10Y point dropped on short-covering by traders amid slump in 1-year OIS tracking the rise in INR. Traders stayed cautious ahead of the RBI MPC outcome due on Wednesday. • The rupee pared gains as banks persistently bought dollars on behalf of importers taking advantage of the sharp appreciation in the local currency. INR closed at 93.06/$ vs 93.10/$. • The 10Y yield closed 9bp lower at 7.04% vs 7.13%. • The latest banking system liquidity stayed in surplus of ~INR 3644.46 Bln. The liquidity surplus rose because of the government's month-end spending.
