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Bond yields rise after RBI governor pours cold water on rate cut hopes

17 Jul 2012 Evaluate

Bond yields rose after Reserve Bank of India’s governor Duvvuri Subbarao, ruined hopes of a rate cut at the July 31 policy review. He stated that inflation numbers still remain 'way above' comfort levels. The wholesale price index (WPI), India's main inflation gauge, slowed to its lowest level in five months at 7.25 percent for the month of June, as compared to 7.55% (Provisional) for the previous month and 9.51 percent during the corresponding month of the previous year.

On the global front, US 10-year Treasuries edged lower in Asian trading on Tuesday but their losses were limited after weak retail sales data combined with a cut in the International Monetary Fund's global growth forecast provided fresh signs of a slowdown in the US economy. Meanwhile, Brent crude held steady above $103 per barrel on Tuesday on hopes of more policy steps by central banks to bolster global economic growth ahead of US Federal Reserve Chairman Ben Bernanke's testimony.

Back home, the yields on 10-year benchmark 8.79% - 2021 inched up by 2 basis points at 8.07% from its previous close of 8.05% on Monday, after the central bank chief said inflation remains well above comfort levels, dashing hopes of a rate cut at the July 31 monetary policy review.

The benchmark five-year interest rate was trading 1 basis point higher at 6.88% from its previous close of 6.87%

The Reserve Bank of India has announced the auction of 91-day and 182-day Government of India Treasury Bills for notified amount of  Rs 7,000 crore and Rs 5000 crore respectively. The auction will be conducted on July 18, 2012 using 'Multiple Price Auction' method.

Additionally, thirteen State Governments announced Auction of State Government Stocks (Securities) for Rs 10,280.00 crore on July 17, 2012.

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