Bond yields hit their lowest level in three weeks after Reserve bank of India (RBI) allowed foreign institutional investors (FIIs) to buy $5 billion more in government bonds, while keeping the overall limit intact, a move which is expected to re-price 3-5 year bonds, preferred by FIIs.
Earlier this year, the limit for long-term investors for investment in government securities was raised from $5 billion to $10 billion within the total limit of $30 billion available to them. The RBI, however, underscored that the incremental investment limit of $5 billion shall be required to be put in government bonds with a minimum residual maturity of three years.
On the global front, U.S. long-term Treasury debt prices ended slightly lower on Wednesday in thin trading, but their near-term outlook remained positive on safe-haven demand as global tensions in the Middle East and Ukraine persisted. Meanwhile, Brent crude held steady above $108 a barrel on Thursday as a surprisingly strong reading on Chinese manufacturing bolstered hopes for higher demand in the world's No.2 oil consumer.
Back home, the yields on new 10 year Government Stock 2023 was trading 2 basis points lower at 8.64% from its previous close of 8.66% on Wednesday.
The benchmark five-year interest rate swaps were trading 1 basis point lower at 7.87% from its previous close of 7.88% on Wednesday.
The Government of India announce the sale of four dated securities for Rs 14,000 crore on July 25, 2014, including (i) 8.27% Government Stock 2020 for a notified amount of Rs 2,000 crore, (ii) New 10-year Government Stock for a notified amount of Rs 7000 crore, (iii) 8.32% Government Stock 2032 for a notified amount of Rs 2000 crore and lastly (iv) 8.30% Government Stock 2042 for a notified amount of Rs 3000 crore respectively.