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Bond yields bounce back on bargain buying

29 Mar 2012 Evaluate

Bonds yields eased as traders picked bargains after a big sell off in the previous session. Bond slipped to 3 month’s low in the previous session as concerns over higher government borrowing in first half of 2012-13, that constituted 65 per cent of the full year target, perturbed investor’s. However, bond prices also slid on account of government heavy borrowing programme in the first week of April, as Rs 18,000 crore, the biggest auction comes bang in the first week.

On the global front, US Treasuries prices fell on Wednesday after weak demand for a debt sale dampened gains built on Federal Reserve Chairman Ben Bernanke's assurances US interest rates will remain low. Meanwhile, Brent crude held steady near $124 on Thursday as news of a surge in US crude inventories and Western nations' talks on releasing strategic oil reserves offset supply disruption concerns over tension in the Middle East.

The yields on 10-year benchmark 8.79% - 2021 bonds eased 3 basis points at 8.59% from its previous close of 8.62%.

The benchmark five-year interest rate swaps was trading steady from its previous close of 7.58%.

The government of India, after discussion with the Reserve Bank of India (RBI), announced the plan to borrow a gross Rs 3.7 lakh crore during the first half of 2012-13, which is 65 per cent of the full year target. The government plans to borrow Rs 5.7 lakh crore during the complete fiscal 2012-13, higher than Rs 5.1 lakh crore borrowed during the current fiscal, in an attempt to drag fiscal deficit down to 5.1 per cent.

The Government of India have announced the sale (re-issue) of four dated securities for Rs 18,000 crore on April 3, 2012 (i) “8.19 percent Government Stock 2020” for a notified amount of  Rs 4,000 crore (nominal) through price based auction, (ii) “9.15 percent Government Stock 2024” for a notified amount of  Rs 8,000 crore (nominal) through price based auction (iii) “8.97 percent Government Stock 2030” for a notified amount of  Rs 3,000 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. The auctions will be conducted using uniform price method. The auctions will be conducted by the Reserve Bank of India, Fort, Mumbai on April 03, 2012 (Tuesday).

Also, fifteen State Governments have announced the sale of 10-year State Development Loans (SDLs) for an aggregate amount of Rs 6,579.00 crore (face value) through yield based auction using multiple price auction method. The auction will be conducted by the RBI at Mumbai on March 29, 2012.

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