Bond yields spike to three week high’s; absence of OMO’s announcement aids

30 May 2012 Evaluate

Bond prices receded, with yields touching a three week’s high level, as absence of any open market operation announcement so far this week, weighed on the sentiment. The RBI in each of the previous three weeks has conducted OMOs in order to offset the impact of FX interventions on rupee liquidity. However, prices of safe haven instrument also cooled off as trader’s perceived the instrument as being technically overbought.

On the global front, US Treasury bond prices edged higher in Asia on Wednesday, as mounting fears about some euro zone countries' ability to service their debt spurred demand for fix-income assets. Meanwhile, Brent dropped below $107 per barrel as deepening euro zone debt crisis is expected to hamper the global fuel demand.

The yields on 10-year benchmark 8.79% - 2021 bonds were trading at 8.56%, it’s highest since May 10, which is higher than Tuesday's close of 8.52%.

The benchmark five-year interest rate swaps rose 1 basis points to 7.45% from its previous close of 7.44%.

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 5,000 crore respectively . The auction will be conducted on May 30, 2012 using 'Multiple Price Auction' method.

Back home, the Government of India after market hours on Monday announced the sale (re-issue) of four dated securities for Rs 15,000 crore, which includes (i) “8.19% Government Stock 2020” for a notified amount of Rs 4,000 crore (nominal) through price based auction, (ii) “9.15% Government Stock 2024” for a notified amount of Rs 7,000 crore (nominal) through price based auction (iii) “8.28% Government Stock 2032” for a notified amount of Rs 2,000 crore (nominal) through price based auction and (iii) “8.83% 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 June 01, 2012 (Friday).

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