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Bond yields nudge higher ahead of Rs 12,000 crore debt sale auction

08 Jul 2011 Evaluate

Bond yields nudged higher tracking an overnight rise in U.S. yields and a jump in global oil prices. Meanwhile, the Rs 12,000 crore debt sale auction also weighed on the sentiment. However, demand for bonds from state-run banks to meet mandatory investment rules may limit the rise of the bond yields. Banks are required to keep 24 percent of their deposits in government debt and other approved securities under a statutory liquidity ratio norm.

On the global front, U.S. Treasuries prices fell on Thursday as the encouraging private-sector jobs data and European Central Bank support for Portuguese debt reduced worries about the economy and sovereign fiscal problems in Europe. Meanwhile, Oil jumped on Thursday by the biggest percentage in two months, hitting a three-week high as U.S. data on jobless claims and retail sales came in stronger than expected, raising hopes that economic recovery was gaining traction.

Back home, the Government of India have announced the sale of three dated securities for Rs 12,000 crore on July 8, 2011, which includes (i) “8.07 percent Government Stock 2017” for a notified amount of Rs 3,000 crore (nominal), (ii) “8.13 percent Government Stock 2022” for a notified amount of Rs 6,000 crore (nominal) and (iii) “8.28 percent Government Stock 2027” for a notified amount of Rs 3,000 crore (nominal) through price based auctions.

The yields on 10-year benchmark 7.80% - 2021 edged higher by 1 basis point at 8.37% from its previous close of 8.36% on Thursday.

The benchmark five-year interest rate swaps were up basis points at 7.77% from its previous close of 7.73% on Thursday.

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