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Bond yields recede as RBI prunes borrowing size via 91-day treasury bills

04 Apr 2012 Evaluate

Bond yields receded as the Reserve Bank of India (RBI) pruned the borrowing size via treasury bills this week, after the government's first auction for fiscal 2012/13 met with poor investor response. Raising questions about the success of the government's heavy weekly borrowing programme, as gilt auction worth Rs 18,000 crore on Tuesday, its biggest weekly debt sale ever, had to be partly picked up by underwriters.

However, even an improvement in the government's cash balance position has prompted the RBI to reduce the amount of 91-day treasury bills to be sold on Wednesday to Rs 6,000 crore from an earlier notified Rs 9,000 crore. Meanwhile, some talk about the central bank buying bonds in the secondary market also helped soothe the sentiments.

On the global front, US Treasuries prices fell on Tuesday after minutes from the Federal Reserve's March policy meeting showed policymakers appeared less keen to launch a fresh round of monetary stimulus as the US economy improves. Meanwhile, Brent crude also extended losses toward $124 a barrel on Wednesday after the US central bank dashed hopes of further economic stimulus, while news that Saudi Arabia is likely to keep output high in the event of a strategic stocks release also weighed.

Back on the home turf, the yields on 10-year benchmark 8.79% - 2021 bonds were at 8.73%, 1 basis point lower from the previous close of 8.74%

The benchmark five-year interest rate swaps were trading at 7.59%, compared with its previous close of 7.62%.

The Reserve Bank of India has announced the auction of 364-day and 91-day Government of India Treasury Bills for notified amount of Rs 5,000 crore and Rs 6000 crore (revised) respectively. The auction will be conducted on April 4, 2012 using 'Multiple Price Auction' method.

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