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Bond yields ease post central bank’s buyback announcement

01 Feb 2012 Evaluate

Bond yields eased on Wednesday after the central bank announced yesterday that it would buy up to Rs 10,000 crore of government bonds through open market operations, which was in tandem with the government's bond auctions on Friday. The selection of debt to be bought by the RBI in its open market operation (OMO) was also cheered by traders. Further, even RBI Deputy Governor Subir Gokarn indicated on Tuesday that more debt buys were likely as a way to deal with cash shortages in between monetary policy reviews.

On the global front, US Treasuries gained on Tuesday as the Federal Reserve made new purchases of longer-dated debt, and as hope faded that there would be an agreement for a stronger euro zone rescue fund. Meanwhile, Brent crude rose above $111 a barrel on Wednesday, gaining for a second straight session on fears that tensions between Iran and the West may escalate with US lawmakers mulling more sanctions on Tehran, while promising China data also supported sentiment. China's official manufacturing Purchasing Managers Index for January rose to 50.5 compared with 50.3 in December, and was higher than the 49.5 forecast by economists

The yields on 10-year benchmark 8.79% - 2021 bonds fell to 8.12% from Tuesday's close of 8.27%.

The benchmark five-year interest rate swaps were at was at 7.24% from previous close of 7.29% on Tuesday.

The Reserve Bank of India has announced the auction of 182-day and 91-day Government of India Treasury Bills for notified amount of Rs 4,000 crore and Rs 9000 crore respectively. The auction will be conducted on February 01, 2012 using 'Multiple Price Auction' method.

Consistent with the stance of monetary policy and based on the current assessment of prevailing and evolving liquidity conditions, the Reserve Bank of India (RBI) decided to conduct Open Market Operations (OMOs) by purchasing the following government securities for an aggregate amount of  Rs 10,000 crore on February 3, 2012.

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