Bond yields ease in sync with dwindling crude oil prices in wake of global risk averse environment

16 May 2012 Evaluate

Bond yields eased in sync with global crude oil prices on account of mounting bids for safe-haven instruments in the backdrop of global risk environment. Meanwhile, little relief on account of RBI’s plan for OMO’s were counterbalanced by central bank's suspected interventions in foreign exchange markets, in order to prop up beleaguered Indian currency.

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 18, 2012 through multi-security auction using the multiple price method.

On the global front, US Treasuries were firmly place in Asia on Wednesday, with 10-year yields oscillating near a seven-month low as investors placed bets for a safe haven on widening worries that Greece may be inching closer to an eventual exit from the euro zone. Meanwhile, Oil offloaded more than $1 on Wednesday, as a larger-than-expected rise in crude stocks in the United States combined with the qualms of Greece's exit from the euro zone muddied the outlook for demand growth.

Back home, the yields on 10-year benchmark 8.79% - 2021 bonds edged 3 basis points lower at 8.47% from its previous close of 8.50%.

The benchmark five-year interest rate swaps fell 3 basis points at 7.42% from its previous close of 7.45% on Tuesday.

The Reserve Bank of India has announced the auction of 91-day and 364-day Government of India Treasury Bills for notified amount of Rs 10,000 crore and Rs 5000 crore respectively. The auction will be conducted on May 16, 2012 using 'Multiple Price Auction' method.

Government of India announced the sale of four dated securities for Rs 15,000 crore on May 18, 2012, which include, (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 7,000 crore (nominal) through price based auction (iii) “8.97 percent Government Stock 2030” for a notified amount of Rs 2,000 crore (nominal) through price based auction and (iv) “8.83 percent Government Stock 2041” 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 18, 2012 (Friday).

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