Bond yields edge-up on profit-taking, buyback announcement

10 Jan 2012 Evaluate

Bond yields edged higher on Tuesday due to mild profit-taking in the bonds after aggressive buying in recent sessions, with traders expecting a bond buyback announcement from the RBI later in the day. Further, the traders are also awaiting two crucial data prints - November factory output due on January 12 and the headline inflation number for December, scheduled for release on January 16 - for possible cues on the likely central bank move on rate cuts.

On the global front, medium-term Treasuries ended barely higher on Monday, while long-dated US debt came under a bit of pressure from profit-taking and price cuts before supply. While, US crude oil futures rose early on Tuesday, supported by positive consumer credit data and worries about Iran's threats to shut the Strait of Hormuz oil-shipping route, but gains were capped by the festering euro zone debt concerns.

The yields on 10-year benchmark 8.79% - 2021 bonds were trading at 8.23% up from its previous close of 8.20% on Monday.

The benchmark five-year interest rate swaps were up by 4 basis points at 7.11% from its previous close.

The Government of India have announced the sale (re-issue) of three dated securities for Rs 14,000 crore (i) “New 8 year Security (GS2020) for a notified amount of Rs 4,000 crore (nominal) through yield based auction, (ii) “9.15 percent Government Stock 2024” for a notified amount of Rs 6,000 crore (nominal) through price based auction and (iii) “8.97 percent Government Stock 2030” for a notified amount of Rs 4,000 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, Fort, Mumbai on January 13, 2012 (Friday).

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 6,000 crore and Rs 4, 000 crore respectively. The auction will be conducted on January 11, 2012 using 'Multiple Price Auction' method.

Meanwhile, ten State Governments have announced the sale of their 10-year State Development Loans (SDLs) for an aggregate amount of Rs 9,167.000 crore (face value) through yield based auction using multiple price auction method. The auction will be conducted by the RBI at Mumbai on January 10, 2012 (Tuesday).

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