• The 10-year benchmark government bond (6.33% GS 2035) opened 1bp higher at 6.58% on Tuesday. • Over the day, 10Y yields dropped to 6.51% on speculation that the Reserve Bank of India was buying gilts on-screen after the disappointing state bond auction results. • The SDL auction worth ~INR 298 Bn witnessed tepid demand as market participants didn’t want to place aggressive bets ahead of the RBI MPC outcome and the weekly IGB auction. RBI offered 10Y Tamil Nadu at 7.20%, 10Y Rajasthan at 7.24%, 10Y Punjab at 7.49%. • Meanwhile, Indian rupee ended close to record low of INR 89.87/$. RBI conducted 2-day VRRR for INR 500 Bn. The demand was robust as it was fully subscribed at 5.49%. The latest banking system liquidity stands in surplus of ~INR 2587.66 Bn. • The 10Y point closed 5bps lower at 6.52% vs 6.57%.
