Bond yields ebb to three month level in global risk averse milieu

08 Jun 2012 Evaluate

Bond yields, after edging higher in the previous session, ebbed to lowest levels since mid-March, as continuing losing momentum of crude oil, bolstered the hopes of rate cut in RBI’s upcoming monetary policy review on June 18, 2012. However, sale of new 10 year bond, in the later part of the day, could restrict the gaining trajectory of safe haven bonds. Meanwhile, traders expect heavy demand for the issue, with potential yield cut-off of 8.15 percent or below, given the last auction before the RBI's policy meeting on June.

On the global front, benchmark US Treasury bonds rose in Asia on Friday, as investors sought the safety of fixed-income assets. Meanwhile, weighed by uncertainty about the fragile economic recovery in top oil consumer, the United State, after its central bank chief offered few clues about more stimulus measures, Brent crude fell below the $99 on Friday. Federal Reserve Chairman Ben Bernanke's testimony to Congress offered little support to jittery investors who were hoping the Fed to launch a third round of bond buys, or quantitative easing.

Back home, the yields on 10-year benchmark 8.79% - 2021 bonds fell 4 basis points to 8.31%, lowest levels since mid-March, from its previous close of 8.35%.

The benchmark five-year interest rate swaps were down 5 bps at 7.22% from its previous close of 7.27% on Thursday.

The Government of India announced the sale of four dated securities for Rs 15,000 crore on June 8, 2012, which includes, (i) “8.24 percent Government Stock 2018” for a notified amount of Rs 3,000 crore (nominal) through price based auction, (ii) “New 10 year Government Stock 2022” for a notified amount of Rs 7,000 crore (nominal) through yield based auction, (iii) “8.97 percent Government Stock 2030” for a notified amount of Rs 3,000 crore (nominal) through price based auction and (iv) “8.33 percent Government Stock 2036” 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, Mumbai Office, Fort, Mumbai, on June 08, 2012 (Friday).

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