Bond yields edge lower on falling oil prices, IMF forecast

08 Oct 2014 Evaluate

Bond yields edge lower on heavy-buying activities on Wednesday on lower global crude prices and IMF (International Monetary Fund) forecast. The IMF trimmed its forecast for global economic growth on Tuesday, underscoring the widening divide between the accelerating U.S. recovery and stagnation or a slowdown in the eurozone and Asia. As the global economy facing problems, traders plan to play safe and add Bonds in their portfolios as they were better performing defensive asset. Bonds worth nearly Rs 363 billion ($5.91 billion) change hands by mid-day, against a recent full-day average of Rs 300 billion (4.89 billion US dollar).

On the currency front, Indian rupee appreciated as sentiment improved after positive growth forecast for India from the International Monetary Fund. However, the cautiousness in the local equity markets limited the rise.

On the global front, U.S. Treasuries yields plunged on Tuesday, with long-dated yields hitting their lowest since May of last year, after fresh signs of economic weakness in Germany and a lower International Monetary Fund global growth forecast fueled safe-haven bids. Meanwhile, Brent crude futures fell below $91 a barrel on Wednesday to their lowest since June 2012, holding to a months-long tumble in prices as lower economic growth forecasts raised new concerns about global oil demand amid rising U.S. inventory levels.

Back home, the yields on new benchmark 8.40%- 2024 bonds were trading 3 basis points lower at 8.42% from its previous close of 8.45% on Tuesday.

The benchmark five-year interest rate swaps were trading 5 basis points lower at 7.75% from its previous close of 7.80% on Tuesday.

The Government of India announced the sale of four dated securities for 15,000 crore on October 10, 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 7000 crore, (iii) 9.20% Government Stock 2030 for a notified amount of Rs 2000 crore and lastly (iv) 9.23% Government Stock 2043 for a notified amount of Rs 3000 crore.

The Reserve Bank of India has announced the auction of 182 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 October 8, 2014 using 'Multiple Price Auction' method.

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