Bond yields ease with RBI’s buyback announcement

28 Dec 2011 Evaluate

Bond yields eased after the Reserve Bank of India announced Rs 12,000 crore buyback, which would help ease tight cash conditions. Further, the buyback comes ahead of a Rs 15,000 crore unscheduled debt sale by rthe government on Friday.

The RBI, in its mid quarter monetary policy review released on December 16, 2011, had stated that Open Market Operations would be conducted as and when considered appropriate. 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 OMOs by purchasing the government securities for an aggregate amount of Rs 12,000 crore on December 29, 2011 through multi-security auction using the multiple price method.

On the global front, US Treasury prices edged higher on Tuesday as fewer-than-normal market participants returned to their desks for the shortened week between Christmas and New Year. While, brent crude oil steadied above $109 a barrel on Wednesday after rallying for six straight sessions, supported by Iran's threat to halt oil shipments through the Strait of Hormuz.

The yields on 10-year benchmark 8.79% - 2021 bonds were trading lower at 8.44% from its previous close on Tuesday.

The benchmark five-year interest rate swaps was trading unchanged at 7.00% from its previous close of 7.02%.

The Reserve Bank of India has announced the auction of 91-day and 364-day Government of India Treasury Bills for notified amount of Rs 4,000 crore each. The auction will be conducted on December 28, 2011 using 'Multiple Price Auction' method.

The Government of India have announced the sale (re-issue) of (i) “7.99 percent Government Stock 2017” for a notified amount of Rs 3,000 crore (nominal) through price based auction, (ii) “9.15 percent Government Stock 2024” for a notified amount of Rs 6,000 crore (nominal) through price based auction (iii) “8.28 percent Government Stock 2027” for a notified amount of Rs 3,000 crore (nominal) through price based auction and (iv) “8.83 percent Government Stock 2041” 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 30, 2011 (Friday).

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