• On Thursday, the 10-year benchmark government bond (6.33% GS 2035) opened flat at 6.54%. • Over the day, value-buying was witnessed ahead of tomorrow’s RBI policy rate decision and the weekly bond auction. The appreciation in INR to close at 89.98/$ on likely intervention by the RBI supported the rally in bonds. • RBI MPC is due tomorrow and is expected to maintain a status quo with repo rate at 5.5%, focus will be on the tone with any measures including OMO calendar to support bond yields. The central bank will offer 6.48% GS 2035 for INR 320Bn at the weekly auction tomorrow. • The 10Y point ended 1bp lower at 6.53% vs 6.54%. • RBI conducted overnight VRRR for INR 750 Bn. The demand was robust as ~INR 723.77 Bn was subscribed at 5.49%. The latest banking system liquidity stands in surplus of ~INR 2563.96 Bn.
