Bond yields tumble to 2-weeks low in backdrop of risk-averse milieu

09 May 2012 Evaluate

Bond yields tumbled on Wednesday on account of global risk-aversion sentiment, which enhanced the demand of fixed-income assets; thereby sending yields to 2 weeks low, as direction of yields are directly inversed from that of safe haven bond. However, benchmark five-year interest rate swaps remain range-bound, as persistent worries about liquidity due to suspected RBI intervention in forex markets kept OIS elevated.

On the global front, US Treasury prices edged higher in Asia on Wednesday, with benchmark yields slipping closer to three-month lows as fears about a resurgence of Greece's debt crisis prompted investors to seek the safety of fixed-income assets. Political stalemate in Greece after weekend elections which could lead to the formation of a government opposed to the conditions of its international bailout, mainly fluxed investor’s of Greece’s ability to pay its onerous debt.

Meanwhile, Brent crude slipped towards $112 on Wednesday, maintaining its downtrend for a sixth session, as political uncertainty in the debt-laden euro zone and rising oil stocks in the United States revived worries about fuel demand.

Back home, the yields on 10-year benchmark 8.79% - 2021 bonds were trading lower at 8.52% from its previous close of 8.54% on Tuesday.

The benchmark five-year interest rate swaps were trading flat at its previous close of 7.51%.

The Government of India has announced the sale of four dated securities for Rs 15,000 crore, which 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. The auctions will be conducted using uniform price method. The auctions will be conducted by the Reserve Bank of India, Fort, Mumbai on May 11, 2012 (Friday).

The Reserve Bank of India has announced the auction of 91 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 May 9, 2012 using 'Multiple Price Auction' method.

Consistent with the stance of monetary policy and based on the current assessment of prevailing and evolving liquidity conditions, the Reserve Bank has decided to conduct Open Market Operations by purchasing government securities for an aggregate amount of Rs 12,000 crore on May 11, 2012 through multi-security auction using the multiple price method.

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