Mutual Funds’ exposure to Government Securities (G-sec) declined 21% to Rs 1273.01 billion, in the last three months after demonetisation, February 2017 data shows. In November 2016 Mutual Funds’ exposure to Government Securities reached to Rs 1623 billion, as surge in system liquidity due to demonetisation. Benchmark government bond has seen yields rise by 70bps over the last three months and by 50bps over the last one month as RBI held rates and changed its policy stance from accommodative to neutral leading to offloading G-sec positions.Strong US February job numbers have increased probability of a 25bps rate hike by the Fed in its meeting in March can lead to further decline in Mutual funds exposure to G-sec .
MF's exposure to Government Securities Exposure (Rs billion)
Corporate Bonds Traded Levels
Three-year AAA corporate bonds were trading at levels of 7.38% as of week ended 10th March. Spreads were 2 bps down week on week at 54 bps. Three-year AAA NBFC bonds were trading at levels of 7.78% with spreads 3 bps up at 94 bps levels. Three year AA+ NBFC bonds were trading at levels of 8.15% with spreads 2 bps down at 131 bps.
Five-year AAA corporate bonds were trading at levels of 7.68%. Spreads were 4 bps up at 64 bps. Five-year AAA NBFC bonds were trading at levels of 7.88% with spreads 1 bps up at 84 bps.
Ten-year AAA corporate bonds were trading at levels of 7.96% with spreads 9 bps down at 94 bps. Ten-year AAA NBFC bonds were trading at levels of 8.18% with spreads 7 bps down at 116 bps.
In the week ended 10th March, FIIs were net buyers of INR bonds for around Rs 9.36 billion for the week.One month PSU bank CDs were trading at 6.50% levels. Three-month residual maturity CDs were most active with volumes of Rs 74.71 billion. Three months and twelve months PSU bank CDs were trading at 6.25% and 6.55% levels each at spreads of 35 bps and 38 bps respectively against T-bill yields. Three months maturity Manufacturing and NBFC sector CPs were trading at 6.30% and 6.85% levels respectively.
One-year maturity Manufacturing and NBFC sector CPs were trading at 7.00% and 7.30% levels respectively.
As on 10th March, FII debt utilisation status stood at 66.63% of total limits, 19 bps higher against previous week. FII investment position was at Rs 3233.78 billion in INR debt. FII investment position stands at Rs 1539.17 billion in gilt securities that also includes investment in Interest Rate Futures and at Rs 1694.61 billion in corporate bonds.