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Bond yields ease on RBI’s buyback announcement

23 May 2012 Evaluate

Bond yields eased as traders took a heart out of Reserve Bank of India’s (RBI) buyback announcement. 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 the government securities for an aggregate amount of Rs 12,000 crore on May 25, 2012.

The action was seen as a part of the RBI's efforts to offset its interventions in currency markets, which is in defense of the fall of the beleaguered Indian currency.

On the global front, US Treasury bond prices gained in Asia, getting the tailwind from weaker equities ahead of a meeting of European leaders. Meanwhile, Brent crude slipped sub $108 as a potential deal between Iran and the UN nuclear regulator eased qualms over oil supply disruption, while nagging fears of a messy Greek exit from the euro zone and slowing Chinese economy’s growth, weighed on demand.

Back home, the yields on 10-year benchmark 8.79% - 2021 bonds was trading 2 basis points lower at 8.50% from its previous close of 8.52% on Tuesday.

The Government of India have announced the sale (re-issue) of four dated securities for Rs 15,000 crore on May 25, 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 6,000 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 RBI 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 5,000 respectively. The auction will be conducted on May 23, 2012 using ‘Multiple Price Auction’ method.

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