Bond yields continue to recede post RBI’s aggressive stance

18 Apr 2012 Evaluate

Bond yields continued to recede on Wednesday as markets continued to cheer the 50 basis points repo rate cut by the Reserve Bank of India (RBI), which led to increased appetite for risky asset class such as equities, thereby sapping the demand of safe heaven treasuries. However, the bond sale auction worth Rs 16,000 crore later this week could restrict the slippage of yields.

Traders would be closely watching out Friday's Rs 16,000 crore worth bond sale to gauge market appetite for government debt post-RBI. A sale of shorter-dated Treasury bills also would take place later in the day.

On the global front, US Treasuries were steady in Asia on Wednesday as a successful Spanish sovereign debt auction overnight calmed some fears about Europe's debt crisis for now, though another auction loomed later this week. Meanwhile, Brent crude futures held steady above $118 on Wednesday as concerns on the euro zone crisis eased after a successful Spanish debt auction and a better growth forecast from the International Monetary Fund (IMF). The IMF offered a cautiously optimistic view on global growth, which it said is slowly improving as the US recovery gains traction and dangers from Europe recede.

Back home, the yields on 10-year benchmark 8.79% - 2021 bonds were down 2 basis points to 8.32% from its previous close of 8.34%.

The benchmark five-year interest rate swaps also trading at 7.43% from its previous close of 7.42% on Tuesday.

The Government of India have announced the sale (re-issue) of four dated securities for Rs 16,000 crore on April 20, 2012, which include (i) “8.19% Government Stock 2020” for a notified amount of Rs 4,000 crore (nominal) through price based auction, (ii) “9.15% Government Stock 2024” for a notified amount of Rs 7,000 crore (nominal) through price based auction (iii) “8.97% Government Stock 2030” for a notified amount of Rs 2,000 crore (nominal) through price based auction and (iv) “8.83% Government Stock 2041” for a notified amount of Rs 3,000 crore (nominal) through price based auction.

Additionally, 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 9000 crore respectively . The auction will be conducted on April 18, 2012 using 'Multiple Price Auction' method.

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