• On Tuesday, the 10-year benchmark government bond (6.48% GS 2035) opened 1bp lower at 6.68%. • Over the day, 10Y point dropped to 6.65% level on short covering amid speculation that the Reserve Bank of India is purchasing gilts on-screen. • Meanwhile, the SDL auction result came better than the market expectations. RBI offered 10Y Odisha at 7.49%, 11Y Karnataka at 7.54% and 30Y Tamil Nadu at 7.58%. However, bond prices erased gains tracking a sharp rise in 5Y OIS rate surged to fresh 11-month high of 6.1050%. • Indian rupee depreciated to 1-month low of 91.05/$ as banks persistently bought the greenback on behalf of importers and foreign portfolio investors. However, due to likely RBI intervention in the FX market. INR closed at 90.97/$. The 10Y point ended 2bps lower at 6.67% vs 6.69%. • The latest banking system liquidity stands in surplus of ~INR 818.62 Bn.
