Bond yields pocket slender gains; await OMO announcement

26 Jun 2012 Evaluate

Bond yields edged higher as traders waited to watch whether the central bank announces a new open market operation (OMO). However, RBI’s latest action, which has been termed as a damp squib, is keeping a lid on the bond yield gains, as measures taken included increasing the limit on foreign institutional investors in government bonds by $5 billion to $20 billion and reducing the lock-in period in some long-term infrastructure bonds to one year from three years, fell short of investor’s expectation of much bolder steps from world’s aggressive central bank, RBI.

On the global front, US Treasuries prices were steady in Asia on Tuesday ahead of further supply this week, with the market expected to remain supported as investors remained skeptical about Europe's ability to resolve its wide spreading debt crisis. Meanwhile, Brent crude held steady above $91 per barrel on Tuesday as short-covering and forecasts of a drop in US crude inventories weighed against the worries that a European summit would be unable to produce a concrete solution to the region's debt crisis.

Back home, the yields on 10-year benchmark 8.79% - 2021 were trading 1 basis point higher at 8.34% from its previous close of 8.33% on Monday.

The benchmark five-year interest rate dropped 1 basis point at 7.13% from its previous closing level of 7.14%.

The Government of India have announced the sale (new/re-issue) of (i) “New 5 year Government Stock 2017” for a notified amount of Rs 4,000 crore (nominal) through yield based auction; (ii) “8.15 percent Government Stock 2022” 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) “8.33 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 29, 2012 (Friday).

The Reserve Bank of India has announced the auction of 364-day and 91-day Government of India Treasury Bills for notified amount of Rs 5,000 crore and Rs 10,000 crore respectively. The auction will be conducted on June 27, 2012 using 'Multiple Price Auction' method. The allocation to the non-competitive bidders will be outside the notified amount at the discretion of the Bank.

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