Bond yields edge lower on expectation of strong demand in Rs 16,000 crore debt auction

25 Apr 2014 Evaluate

Bond yields were trading lower on Friday on expectation of strong bidding at the Rs 16,000 crore worth bond auction later in the session. Besides the 10 year bonds, the other bonds on offer are among the least traded, however strong demand is expected for those as well amidst improved liquidity conditions.

Nevertheless, the further gains of bonds were capped by prediction of below-average monsoon rainfall in 2014 by the Indian Meteorological Department, which rose the possibility that drought could jeopardize a fragile economic recovery and stoke inflation.

On the global front, U.S. Treasury long bond yields slipped for a third consecutive session on Thursday, as renewed tensions between Ukraine and Russia wiped out earlier gains posted after the release of positive economic numbers. Meanwhile, brent futures held steady near seven-week highs above $110 a barrel on Friday as growing tensions over Ukraine between top oil producer Russia and the West worsened supply disruption fears.

Back home, the yields on new 10 year Government Stock 2023 were trading 1 basis lower at 8.84% from its previous close of 8.85% on Wednesday.

The benchmark five-year interest rate swaps were trading 2 basis points higher at 8.42% from its previous close of 8.40% on Wednesday.

The Government of India announce the sale of Four dated securities for Rs 16,000 crore on April 25, 2014, which include (i) 7.80% Government Stock 2020 for a notified amount of Rs 4,000, (ii) 8.83% Government Stock 2023 for a notified amount of Rs 7,000 and (iii) 8.32% Government Stock 2032 for a notified amount of Rs 2,000 and (iv) lastly, (iv) 8.30% Government Stock 2042 for a notified amount of Rs 3000 crore. The auctions will be conducted using uniform price method. Up to 5% of the notified amount of the sale of the stocks will be allotted to eligible individuals and Institutions as per the Scheme for Non-Competitive Bidding Facility in the Auction of Government Securities.

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