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Bond yields drop tracing slump in global oil prices

09 Dec 2014 Evaluate

Bond yields were trading lower on Tuesday on the back of slump in global oil prices, which reinforced expectations of a rate cut early next year. However, further gains in bonds were unlikely ahead of inflation data on Friday, which would provide more cues on RBI’s stance in its next monetary policy review.

On the global front, U.S. Treasuries yield curve flattened to a six-year low on Monday after a surprisingly strong November employment report boosted expectations of an interest rate increase next year. U.S. employers added the largest number of workers in almost three years last month and wage gains accelerated, a sign of economic strength that could draw the Federal Reserve closer to raising rates. Meanwhile, benchmark Brent crude slipped again on Tuesday to its lowest in five years, dropping below $66 a barrel after plunging more than 4 percent the day before on worries of a swelling supply glut.

Back home, the yields on new 10 year Government Stock 2023 were trading 2 basis points lower at 7.9% from its previous close of 7.92% on Monday.

The benchmark five-year interest rate swaps were trading 5 basis points higher at 7.17% from its previous close of 7.12% on Monday.

The Reserve Bank of India will conduct overnight reverse repo variable rate auction for a notified amount of Rs 10,000 crore today (December 8, 2014, Monday). 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

The Reserve Bank of India has announced the auction of 91 and 364 day Government of India Treasury Bills for notified amount of Rs 8,000 and Rs 5,000 crore respectively. The auction will be conducted on December 10, 2014 using 'Multiple Price Auction' method.

Ten State Governments have offered to sell 06/10 year securities by way of auction for an aggregate amount of Rs 8,180 crore (Face Value) for Rs 8,180 crore on December 09, 2014 .

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