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Bond yields tread water after RBI’s status quo stance in bi-monthly monetary policy review

30 Sep 2014 Evaluate

Bond yields were treading water after the central bank, in its monetary policy review said upside risks to its January 2016 inflation target of 6% are significant and its future policy stance will be influenced by this inflation target.

In a bid to maintain financial and price stability, the Reserve Bank of India (RBI), in its fourth bi-monthly monetary policy review, as widely expected, kept its key policy repo rate unchanged at 8%. Consequent to which the reverse repo rate under the LAF stood unchanged at 7.0%, and the marginal standing facility (MSF) rate and the Bank Rate at 9.0% respectively.

On the global front, US treasuries prices gained on Monday as civil unrest in Hong Kong weighed on global stock markets, and the yield curve flattened as investors bet that U.S. economic data would continue to improve. Meanwhile, brent crude futures edged back down towards $97 a barrel on Tuesday because of ample supplies, a lack-lustre global economy and the strengthening of the dollar to a four-year peak against a basket of major currencies.

Back home, the yields on new benchmark 8.40%- 2024 bonds were steady at Monday’s close of 8.49%.

The benchmark five-year interest rate swaps were trading steady at Monday’s close of 7.83%.

The Reserve Bank of India has announced the auction of 91 & 364 days Government of India Treasury Bills for notified amount of Rs 9,000 crore and Rs 6,000 crore respectively. The auction will be conducted on October 1, 2014 using 'Multiple Price Auction' method.

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