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Bond yields ease post gloomy industrial productivity data

12 Apr 2012 Evaluate

Bond yields were trading almost flat but with negative bias as trader’s preferred staying on the sidelines ahead of the release of the industrial output data due to be released in the noon, for the cues on the central bank's rate action next week and before Rs 15,000 crore debt sale auction next week.

However, markets are unlikely to be significantly impacted by the February industrial output data, which is estimated to grow 6.6 percent on year, slightly slower than January's 6.8 percent.

On the global front, US Treasury debt prices fell on Wednesday, giving back much of the previous day's gains as diminished worries over Europe's fiscally troubled countries and new Treasury supply weighed on the market Meanwhile, Brent crude held steady above $120 on Thursday as a weaker dollar helped recoup losses made earlier in the day, while comments from the US Federal Reserve and the European Central Bank eased worries about growth in oil demand.

Back on the home turf, the yields on 10-year benchmark 8.79% - 2021 bonds eased 2 basis points to 8.53% from its previous close of 8.55% on Wednesday.

The benchmark five-year interest rate swaps were steady at previous close of 7.54% on Wednesday.

Also, Government of India have announced the sale of four dated securities for  Rs 15,000 crore on April 13, 2012, that include, (i) “8.24 percent Government Stock 2018” for a notified amount of Rs 4,000 crore (nominal) through price based auction, (ii) “8.79 percent Government Stock 2021” for a notified amount of  Rs 7,000 crore (nominal) through price based auction (iii) “8.28 percent Government Stock 2027” for a notified amount of  Rs 2,000 crore (nominal) through price based auction and (iv) “8.33 percent Government Stock 2036” for a notified amount of  Rs 2,000 crore (nominal) through price based auction.

Post IIP data:

India's industrial production grew at a slower-than-expected pace in February, weighed down by a contraction in consumer durables and consumer goods, reinforcing expectations that the RBI could soon cut interest rates for the first time in three years to support the economy. However, the pace of expansion in industrial production at 4.1 percent was faster than a sharply revised 1.14 percent annual growth in January from 6.8 percent earlier. The government attributed the revision to an error in sugar production data.

The yields on 10-year benchmark 8.79% - 2021 bonds eased 8.48% from 8.53% seen earlier.

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