Bond yields spiraled up on Monday as traders pruned their positions a day prior to the Reserve Bank of India's policy review. Some traders anticipate RBI to cut CRR, the proportion of deposits that must be held with the RBI, by 25 or 50 basis points from its current 6 percent on Tuesday. However, top officials of the RBI have downplayed a cash reserve ratio cut, saying it would be contrary to its anti-inflationary stance. The central bank's macroeconomic and monetary development report due later in the day could also offer some clues on what to expect from the Tuesday's policy review.
On the global front, US Treasuries debt prices fell on Friday as investors took a more optimistic tone on Greece's debt restructuring talks, reducing the demand for safe-haven bonds, ahead of $99 billion in new supply planned for next week. Meanwhile, Brent crude futures held steady around $110 on Monday as concerns about European demand countered worries about supply disruptions from the Middle East due to simmering tensions between the West and Iran.
The yields on 10-year benchmark 8.79% - 2021 bonds were at 8.19%, up from Friday's close of 8.18%.
The benchmark five-year interest rate swaps were trading at 7.25% from its previous close of 7.26% on 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 4000 crore respectively. The auction will be conducted on January 25, 2012 using 'Multiple Price Auction' method.
Also, twelve state governments would announce auction of State Development Loans 2022 for Rs 10,961.000 crore on January 24, 2012.
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