Bond yields were treading water on hopes of an ease in weekly food and fuel inflation and before Rs 10,000 crore bond buyback. However, supply amid tight liquidity is seen dampening sentiment, besides keeping the market in a tight range. The deficit in the banking system stood at Rs 16,5000 crore on Wednesday, far above the Reserve Bank of India's comfort level of about Rs 60,000 crore.
On the global front, US Treasuries price fell on Wednesday as traders sold positions ahead of year-end and long bonds underperformed as investor’s unwound trades that were designed to profit from Federal Reserve purchases of longer-dated debt. Meanwhile, US crude futures rose for a fourth session on Thursday in early Asian trade after US crude stockpiles fell to a three-year low.
The yields on 10-year benchmark 8.79% - 2021 bonds were trading tad lower at 8.33% from its previous close of 8.34%.
The benchmark five-year interest rate swaps was trading unchanged at 6.91%.
Meanwhile, food inflation eased sharply to 1.81% in the week ended December 10, from an annual 4.35% rise in the previous week, government data showed on Thursday. Moreover, the fuel inflation remained unchanged at 15.24% in the latest week compared with the prior week.
Consistent with the stance of monetary policy and based on the current assessment of prevailing and evolving liquidity conditions, the Reserve Bank has decided to conduct Open Market Operations by purchasing government securities for an aggregate amount of Rs 10,000 crore on December 22, 2011.
The Government of India have announced the sale (re-issue) of (i) “7.83 percent Government Stock 2018” for a notified amount of Rs 4,000 crore (nominal) through price based auction, (ii) “8.79 percent Government Stock 2021” for a notified amount of Rs 5,000 crore (nominal) through price based auction and (iii) “8.97 percent Government Stock 2030” for a notified amount of Rs 3,000 crore (nominal) through price based auction. The auctions will be conducted using uniform price method. The auctions will be conducted by the Reserve Bank of India, Mumbai Office, Fort Mumbai on December 23, 2011 (Friday).
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