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

03 Feb 2015 Evaluate

Bond yields edged higher after Reserve Bank of India (RBI), on much expected lines after effecting a 25 basis points rate cut outside its monetary policy cycle in Mid-January, left policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.75% in its sixth bi-monthly monetary policy review. Consequently, the reverse repo rate under the LAF stood unchanged to 6.75% and the marginal standing facility (MSF) rate, determined at a spread of 100 basis points above repo rate, stood at 8.75%, while bank rate also remains at 8.75%. Besides, the cash reserve ratio (CRR) of scheduled banks also remained steady at 4.0% of net demand and time liabilities (NDTL).

In a bit of a twist, RBI however reduced statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 22.0% to 21.5% of their NDTL with effect from the fortnight beginning February 7, 2015.

On the global front, US treasury prices turned flat on Monday, reversing much of their earlier gains as WallStreet stocks staged a rally in late morning, reducing the safe haven appeal of government debt. Meanwhile, US crude futures held above $50 a barrel on Tuesday morning following sharp gains in the previous two sessions, with some investors betting that the bottom of six month rout has been reached.

Back home, the yields on new 10 year Government Stock 2023 was trading 4 basis points higher at 7.68% from its previous close of 7.64% on Monday .

The Reserve Bank of India has announced the auction of 364 and 91 days Government of India Treasury Bills for notified amount of Rs 6,000 crore and Rs 8000 crore respectively. The auction will be conducted on February 04, 2015 using 'Multiple Price Auction' method.

The Reserve Bank of India will conduct 3 day variable rate reverse repo auction for a notified amount of Rs 25,000 crore today (January 30, 2015, Friday). The auction will be conducted between 4.00 pm and 4.30 pm as per the revised guidelines on Term Repo Auctions issued on February 13, 2014.

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