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Bond yields tread water ahead of RBI’s Rs 12,000 crore worth debt buyback result

02 Mar 2012 Evaluate

Bond yields were trading flat as traders were reluctant to pile into bonds before the outcome of the Reserve Bank of India's (RBI) scheduled debt buyback worth up to Rs 12,000 crore. However, yields are also trading flat as negative sentiment prevailing on account of sharp rise in global crude oil prices were counterbalanced by dovish comments made by RBI’s official, late on Thursday. A top official at the RBI said after market hours that growth between 7% and 8% suggests India is entering a phase of surplus capacity, with inflation expected to come down.

On the global front, US Treasury debt prices fell on Thursday as a pushback in expectations on when the Federal Reserve might launch another round of monetary easing continued to weigh on the market and riskier assets drew money away from safe-haven debt. Benchmark 10-year notes traded 17/32 lower in price, and their yields rose to 2.03 percent from 1.97 percent late on Wednesday.

Meanwhile, Brent crude futures coming off an 11-month high, slipped to $126 on Friday, as fears of a supply disruption from Saudi Arabia eased and the market focused on lower seasonal demand for oil in the coming months.

The yields on 10-year benchmark 8.79% - 2021 bonds were flat at previous close of 8.24% on Thursday. 

The benchmark five-year interest rate swaps too were trading tad up at 7.42% from its previous close of 7.41% on Thursday.

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 by purchasing government securities for an aggregate amount of Rs 12,000 crore on March 02, 2012 through multi-security auction using the multiple price method.

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