Bond yields eased marginally as cheer over the central bank's plan to buy bonds this week was tempered by concerns over how the government will tackle its swelling fiscal deficit. Consistent with the stance of monetary policy and based on the current assessment of prevailing and evolving liquidity conditions, the Reserve Bank has decided to conduct Open Market Operations for an aggregate amount of Rs 10,000 crore on February 17, 2012.
India's fiscal position has been deteriorating as economic growth slows. Fiscal deficit for the current financial year is estimated to be at around a percentage point higher than the government's estimate of 4.6 percent. Further, talks of disinvestment of Rs 12,000 crore in this fiscal year, is also weighing on the market. The government is planning to raise about Rs 12, 000 crore via a 5 percent stake sale in ONGC.
On the global front, US Treasuries prices gained on Tuesday after disappointing US retail sales and on doubts Greece will make spending cuts necessary to secure a second bailout package. Meanwhile, Brent crude held steady above $118 on Wednesday as supply concerns in the Middle East sparked by tensions over Iran and disruptions in South Sudan trumped worries about the health of the global economy as Greece struggles to avoid bankruptcy.
The yields on 10-year benchmark 8.79% - 2021 bonds were trading lower at 8.17%, from Tuesday's close of 8.18%.
The benchmark five-year interest rate swaps was at 7.26%, up from Tuesday's close of 7.24%.
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 9,000 crore respectively. The auction will be conducted on February 15, 2012 using 'Multiple Price Auction' method.
The Government of India has announced the sale of three dated securities for Rs 12,000 crore on February 17, 2012, which includes, (i) “8.24 percent Government Stock 2018” for a notified amount of Rs 3,000 crore (nominal) through price based auction, (ii) “8.79 percent Government Stock 2021” for a notified amount of Rs 6,000 crore (nominal) through price based auction and (iii) “8.83 percent Government Stock 2041” for a notified amount of Rs 3,000 crore (nominal) through price based auction.
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