Bond yields edge higher in run-up to Rs 18,000 crore debt sale auction

02 May 2012 Evaluate

Bond yields edged higher as traders cut positions in the run up to Rs 18,000 crore debt sale auction, scheduled to take place on May 4, 2012. Meanwhile, selection of off-the-run security 9.15% 2024 for a notified amount of Rs 8,000 crore in the Thursday’s auction also weighed on sentiments. Off the run securities are those, which are not actively traded. However, improvement in liquidity on account of redemption of 7.40% 2012 bonds to tune of Rs 33,000 crore on Thursday and government spending is likely to lend support to bonds.

On the global front, US Treasury prices halted their overnight slide, holding steady in Asia on Wednesday as investors looked toward to key US employment data later this week to gauge the strength of economic recovery. Meanwhile, Brent crude was steady above $119 a barrel on Wednesday, supported by positive manufacturing data from the United States and China that lifted hopes of higher oil demand at the world's top two energy consumers.

Back home, the yields on 10-year benchmark 8.79% - 2021 bonds edged 3 basis points higher at 8.70% from its previous close of 8.67%.

The benchmark five-year interest rate swaps was up 1 basis point at 7.63% from its previous close of 7.62% on Monday.

The Reserve Bank of India has announced the auction of 91-day and 364-days Government of India Treasury Bills for notified amount of Rs 10,000 crore and Rs 5,000 crore respectively. The auction will be conducted on May 2, 2012 using 'Multiple Price Auction' method.

Meanwhile, the Government of India has announced the sale of four dated securities for Rs 18,000 crore on May 4, 2012, which includes, (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 May 04, 2012 (Friday).

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