Private banks make largest single-day govt bond purchases in 7 years

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MUMBAI: Indian private sector banks made the largest single-session purchase of government bonds in seven years on Friday, including a big investment on behalf of a corporate, traders said.
These banks bought bonds worth a net of Rs 8,343 crore ($1 billion) — the biggest such purchase since November 15, 2016, as per data from Clearing Corp of India. This pushed overall buying to above Rs 20,000 crore for November, after net sales of Rs 10,100 crore in October.
A large corporate likely bought around Rs 5,000 crore of the benchmark paper through a private sector bank, traders said.
“Though Friday’s purchase consists of buying for a constituent client, private banks have been increasing purchases for their own books as they hold a chunky share of maturing papers, and this money needs to be deployed,” a senior treasury official at a private bank said. Inflows of nearly Rs 1.7 lakh crore are due over the next one month as the 8.83% 2023, 4.56% 2023 and 7.68% 2023 papers mature. Most of the money is re-invested in liquid papers, including the five-year and the benchmark 10-year paper, another treasury official said. Improving macroeconomic conditions are also aiding the pick-up in bond buying.
“US data has started to we aken and treasury yields have come down, with indications that the rate cycle has peaked,” said Alok Singh, group treasury head at CSB Bank.
This is also leading to an increase in trading activity from private banks, Singh said. The 10-year US yield has dropped over 55 basis points in November to nearly 4.45%. Traders also said that expectations of debt sales from RBI have diminished as liquidity remains tight, improving buying sentiment.

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