Bond yields fall sharply on RBI plans to sell new tranche of 2024 paper

30 Jul 2014 Evaluate

The yields on new 10 year bond fell off sharply after RBI unexpectedly announced its plans to sell new tranche of 2024 paper this week. Sentiment also was aided after RBI switched to the unpopular multiple-price auction method for first time since May 2013 for Friday's sale. Meanwhile, lower treasury yields and brent crude prices also supported the downtrend of the yields. However, the introduction of new paper definitely led to sell of existing one, which was perhaps the reason as to which the yields on outgoing 10 year benchmark rose sharply.

On the global front, U.S. Treasuries prices rose on Tuesday after a new sale of five-year notes saw solid demand, and the U.S. yield curve flattened to five-year lows ahead of a busy data calendar and Federal Reserve meeting statement. Meanwhile, Brent crude hovered in a tight range near $107.50 a barrel on Wednesday as investor’s eyed U.S. data and policy decision from the Federal Reserve for more price direction. The Fed is expected to cut its monthly bond-buying program by another $10 billion and its policy statement, together with key jobs data on Friday, could provide some cues on performance of world's largest economy.

Back home, the yield on benchmark 8.40%- 2024 bond fell 7 basis points at 8.50% from its previous close of 8.57% on Monday.

The yields on outgoing benchmark 2023, 10-year Government Stock were trading 3 basis points higher at 8.74% from its previous close of 8.71% on Monday.The benchmark five-year interest rate swaps were trading steady at its Monday’s close of 7.90%.

The Reserve Bank of India has announced the auction of 182-days and 91-days Government of India Treasury Bills for notified amount of Rs 6,000 crore and Rs 9000 crore respectively . The auction will be conducted on July 30, 2014 using 'Multiple Price Auction' method.

The Governments of India have announced the sale (re-issue) of three dated securities for Rs 14,000 crore on August 1, 2014, including (i) 8.27% Government Stock 2020 for a notified amount of Rs 3000 crore); (ii) 8.40% Government Stock 2024 for a notified amount of Rs 9000 crore and (iii) 9.23% Government Stock 2043 for a notified amount of Rs 2000 crore.

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