Bond yields creep higher in holiday shortened, debt heavy week

03 Apr 2012 Evaluate

Bonds yields shot higher as the treasuries edged lower in holiday truncated week which would witness highest ever weekly sale of bonds by the Reserve Bank of India (RBI). Meanwhile, negative sentiment due to failed bond buy-back auctions also pushed the yields on 10-year government bonds above 8.75%.

RBI surprised the markets on Thursday by announcing an open market operation (OMO) for bonds worth Rs 10,000 crore. However, the markets were left high and dry since the RBI has bought back only Rs 4,528 crore worth of bonds on March 30, 2012.

On the global front, US Treasuries rose in price on Monday, getting a mild lift from the purchases of fund managers who saw Friday's selloff as overdone and as data showed that fears over dramatically rising yields may be overstated in light of a still moderate US economic recovery.

Meanwhile, Brent crude was steady above $125 a barrel on Tuesday after sharp gains in the previous session, supported by fresh signs of a sustained recovery at the top oil consumer, the United States, and the prospect of tighter crude supplies from the North Sea.

Back on the home turf, the yields on 10-year benchmark 8.79% - 2021 bonds jumped 11 basis points to 8.68% from its previous close of 8.57%.

The benchmark five-year interest rate swaps was trading 7.61%, compared with its previous close of 7.57%.

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.

The Reserve Bank of India has also announced the auction of 364-day Government of India Treasury Bills for notified amount of Rs 5,000 crore and Rs 9000 crore respectively. The auction will be conducted on April 4, 2012 using 'Multiple Price Auction' method.

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