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Bond yields slide on growing hopes of early rate cut

03 Nov 2014 Evaluate

Bond yields after slipping to thirteen-month low in previous trading session extended its declining streak and were trading lower on Monday as hopes of an interest rate reduction gathered momentum even as the central bank signaled that a rate -cut may not take place in the near future. Also, with the Federal Reserve chairman Janet Yellen planning to keep short-term interest rates near zero for a 'considerable time', assets across the board, including bonds, have been rallying as cheap money may be a reality for some more years.

On the global front, U.S. Treasury debt prices fell on Friday as investors grew more optimistic about prospects for the world's largest economy, moving away from safe-haven bonds and turning to other riskier assets that provide higher yields. Meanwhile, Brent crude inched lower on Monday, dropping further away from $86 a barrel as mixed Chinese data and a strong dollar pressured prices.

Back home, the yields on new benchmark 8.40%-2024 bonds was trading 2 basis points lower at 8.26% from its previous close of 8.28% on Friday.

The benchmark five-year interest rate swaps were trading 4 basis points lower at 7.46% from its previous close of 7.50% on Friday.

The Reserve Bank of India has announced the auction of 91 and 182 day Government of India Treasury Bills for notified amount of Rs 9000 crore and Rs 6000 crore respectively. The auction will be conducted on November 05, 2014 using 'Multiple Price Auction' method.

The Reserve Bank of India will conduct 2 days reverse repo auction at variable rate  on November 3, 2014 for a notified amount of Rs 35,000 crore. The auction will be conducted between 4.00 p.m. and 4.30 p.m. as per the revised guidelines on Term Repo Auctions issued on February 13, 2014.

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