Bond yields soar on hopes of potential replacement of benchmark for 10-year bonds

24 Apr 2012 Evaluate

Bond yields were under pressure, with yields at two weeks high, as traders braced for a potential replacement of the benchmark for 10-year bonds. The Reserve Bank of India (RBI) will auction ‘8.79 percent Government Stock 2021’ for a notified amount of Rs 7,000 crore (nominal) in four dated securities price based auction on April 27,2012, however traders widely expect this to be the last such sale for this paper.

On the global front, US Treasuries edged higher in Asia on Tuesday, as fears about European countries' ability to finance their debt prompted investors to park funds in the perceived safe haven of US government debt ahead of this week's Federal Reserve meeting.

Meanwhile, Brent crude was steady under $119 a barrel on Tuesday as fears over the health of the euro zone economies and political uncertainty countered worries over a production stoppage in the North Sea and potential supply disruptions from Iran

Back home, the yields on 10-year benchmark 8.79% - 2021 bonds were up by rose 2 basis points to 8.59% from its previous close of 8.57% on Monday.

The benchmark five-year interest rate swaps were up by 2 basis points to 7.60% from its previous close of 7.58%.

The Government of India have announced the sale (re-issue) of four dated securities for Rs 16,000 crore on April 27, 2012 (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 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 27, 2012 (Friday).

Additionally, the Reserve Bank of India has announced the auction of 91-day and 182-day Government of India Treasury Bills for notified amount of Rs 9,000 crore and Rs 5000 crore respectively. The auction will be conducted on April 25, 2012 using 'Multiple Price Auction' method

Meanwhile, Five State Governments has announced Auction of State Development Loans 2022 for Rs 4715.00 crore on April 24, 2012.

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