Bond yields gain slender traction on profit booking

17 May 2012 Evaluate

Bond yields gained slender traction post previous session’s drubbing, as market-men booked profit after previous sessions spurt of safe haven bond on account of global risk aversion. Further, risk taking that was encountered in Asian markets also had spill-over effect in Indian equity market, which in turn sapped the demand of fixed income assets. However, bond yields momentum was range bound as traders are wary about the central bank's possible interventions in foreign exchange markets given rupee’s turmoil.

On the global front, US Treasuries inched lower in Asia on Thursday on account of profit-taking after benchmark yields faltered near seven-month low level, but losses were capped as continued uncertainty about Greece supported safe-haven demand for fixed-income assets.

Meanwhile, Brent crude plunged near a four-month low on Thursday as investors shunned riskier assets following turmoil in Greece and the euro zone, and also on the reports which stated that oil supplies could rise as G8 countries may tap emergency reserves ahead of sanctions on Iran in July.

Back home, the yields on 10-year benchmark 8.79% - 2021 bonds were trading steady at its previous close of 8.52% on Thursday.

The benchmark five-year interest rate swaps rose 2 basis points to 7.48 % from its previous close of 7.46% on Thursday.

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).

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.

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