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Bond yields tread water on uncertainty over RBI’s stance in its upcoming monetary policy

13 May 2015 Evaluate

Bond yields were treading water with traders remaining uncertain if the recently released inflation data would prompt Reserve Bank of India to ease interest rates in its upcoming monetary policy on June 2.  Easing to four month low, Retail inflation, as measured by the consumer price index (CPI), slowed to 4.87% year-on-year in April, lower compared to 5.17% in March, below street expectation of a number below 5%. However, in a bit of negative surprise, March CPI inflation was revised upwards from 5.17% to 5.25%.

On the global front, US treasuries were steady on Tuesday as some buyers came back to the market, helping the government to sell $24 billion in new three year notes, the first sale of $64 billion in new supply this week. Meanwhile, oil prices extended gains in Asia today due to weak dollar amid expectations that the latest US crude oil inventories report will show a decline, easing a global supply glut.

 Back home, the yields on 10 year Government Stock was trading steady at Tuesday’s close of 7.95%.

The benchmark five year swap rate was trading steady at Tuesday’s close of 7.21%.

The Reserve Bank of India has announced the auction of 91 & 364 day Government of India Treasury Bills for notified amount of Rs 8,000 crore and Rs 6000 crore respectively. The auction will be conducted on May 13, 2015 using 'Multiple Price Auction' method.

The Government of India has announced the sale (re-issue) of the Government Stock through auctions to be held on May 15, 2015, including (i) 8.27 per cent GS 2020 for a notified amount of Rs 3000 crore, (ii) 8.15 per cent GS 2026 for a notified amount of Rs 7000 crore, (iii) 7.95 per cent GS 2032 for a notified amount of Rs 3000 crore and lastly (iv) 8.17 per cent GS 2044 for a notified amount of Rs 3000 crore.

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