Bond yields edge lower on hopes of easing liquidity situation

12 Aug 2014 Evaluate

Bond yields edged lower as sentiment slightly improved on hopes of easing liquidity after RBI conducted one-day repo variable rate auction for a notified amount of Rs 5,000 crore early in the morning, which was oversubscribed, with RBI receiving bids worth Rs 5006 crore against proposed Rs 5000 crore. Meanwhile, liquidity is expected to ease further as RBI could conduct more overnight repos until government spending filters through.

On an assessment of the prevailing liquidity conditions, the Reserve Bank of India conducted a one-day repo variable rate auction for a notified amount of Rs. 5,000 crore between 10.00 am -10.30 am on August 12, 2014 (Tuesday). On the global front, U.S. government debt yields were little changed on Monday, hovering near recent lows as traders clung to their safe-haven bond holdings on anxiety about tensions in the Middle East and Ukraine. Meanwhile, brent crude extended losses for a third straight session, dropping towards $104 a barrel on Tuesday as new political tension on the streets of Baghdad were seen as holding little threat to the OPEC producer's oil output.

Back home, the yield new benchmark 8.40%- 2024 bond was trading 1 basis point lower at 8.58% from its previous close of 8.59% on Monday.

The yields on existing benchmark 2023, 10-year Government Stock was trading 1 basis point lower at 8.81% from its previous close of 8.82% on Monday.

The benchmark five-year interest rate swaps were trading 1 basis point lower at 8.11% from its previous close of 8.12% on Monday.

The Government of India announce the sale of three dated securities for Rs 8,000 crore on August 14, 2014, including (i) 8.40% Government Stock 2024 for a notified amount of Rs 4000 crore, (ii) 8.32% Government Stock 2032 for a notified amount of Rs 2000 crore and lastly (iii) 9.23% Government Stock 2043 for a notified amount of Rs 2000 crore. The auctions will be conducted using multiple 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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