Bond yields edge lower on petrol price hike

24 May 2012 Evaluate

Bond yields edged lower in early deals, as petrol price hike signaled a positive intent on part of the government on fiscal reforms, which in turn eased concerns over inflationary pressure that could be exuberated by potential diesel and LPG prices hike in tomorrow’s EGOM meeting, after Congress-led UPA government announced Rs 7.50 hike - the steepest to date - in petrol prices. Following the hike, a litre of petrol will now cost Rs 78.16 in Mumbai, Rs 73.14 in Delhi, Rs 77.53 in Kolkata and Rs 77.05 in Chennai.

However, the global risk aversion, which drew trader’s fondness towards safe haven bets such as bond, after lack of a breakthrough in Europe's attempts to shake off its debt crisis, also weighed on the sentiment of yields.

On the global front, US Treasury bond prices were steady in Asia as failed attempts of European leads to carve out a concrete decision to resolve the region’s onerous debt crisis offset any concern about new supply. Meanwhile, Brent crude oil gained more than $1 per barrel on Thursday, as traders covered short positions after recent dip on worries relating to the health of the euro zone.

Back home, the yields on 10-year benchmark 8.79% - 2021 bonds edged lower at 8.50% from its previous close of 8.51% on Wednesday.

The benchmark five-year interest rate swaps were trading higher at 7.48% from its previous close of 7.47% on Wednesday.

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.

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