The discipline that is most important is not accounting or economics, but psychology.
USD 24 bn of US 30Y bond auction saw weak demand with Bid-to-Cover Ratio of 2.24 which reflects poor demand in comparison to the 2.39 ratio seen over the prior 12 auctions. Along side a poor auction, comments from Fed Chair Powell accelerated the sell off in the bonds. The Key takeaway from the speech was that FOMC is not yet confident that the stance of monetary policy is sufficiently restrictive as strong growth could undermine progress on inflation and restoring balance to the labor market.
US2s +8 bps, 5.02% , High 5.04% - Low 4.92% (Swing High 5.26%)
US10s +13.50 bps, 4.63%%, High 4.65% - Low 4.47% (Swing High 5.02%)
US30s +15.00 bps, 4.768%, High 4.83% - Low 4.61% (Swing High 5.18%)
US2s10s -39 bps (+ 6 bps)
DXY 105.90 (+0.35%)
On the India macro front,
On Nov 9, liquidity deficit widened to INR 46K crore and Overnight WACR was anchored around the upper corridor band at 6.79%
The OIS curve was relatively unchanged. The week ahead will see the release of the India CPI, WPI data and the Trade Deficit number.
MIFORs saw a total volume of INR 1710 Crs with volume concentrated in the 2Y bucket.
The forward curve moved lower across the curve. C/T points traded a low of 0.04ps and WAR was seen at 0.14 ps (0.61%). T/S points traded a low of 0.03 ps (0.04%) and a WAR of 0.21 ps (0.30%). USD cash demand weighed on the forward curve. Nov 23 points traded 20 bps lower and Oct 24 points trades 4 bps lower.
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