Bond yields retreats from lows on higher food inflation data

18 Jul 2012 Evaluate

Bond yields retreated from lows after June consumer price inflation stayed in double digits, and food inflation picked up speed, exacerbating concerns about a below-average monsoon. The annual rate of inflation, based on the consumer prices index (CPI) in India, eased in the month of June to 10.02 percent, as compared to 10.36 percent for the previous month of April 2012. Meanwhile, Food inflation in the CPI accelerated to 10.71% in June from 10.66% in May.

On the global front, US 10-year Treasuries edged up in Asian trade on Wednesday, after Fed Chairman Ben Bernanke said the central bank was ready to respond to a slowing economy, but abstained from providing details in the future action. The absence of fresh clues on when the Federal Reserve could start a third round of large-scale bond purchases disappointed some traders who had earlier speculated more easing may be on the cards soon.

Back home, the yields on 10-year benchmark 8.79% - 2021 edged 1 basis points lower at 8.08% from its previous close of 8.09% on Tuesday.

The benchmark five-year interest rate was trading steady at its previous close of 6.90%.

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.

The Government of India have announced the sale (re-issue) of four dated securities for Rs 15,000 crore on July 20, 2012 (i) “8.19 percent Government Stock 2020” for a notified amount of Rs 4,000 crore (nominal) through price based auction; (ii) “8.33 percent Government Stock 2026” for a notified amount of Rs 7,000 crore (nominal) through price based auction; (iii) “8.28 percent Government Stock 2032” for a notified amount of Rs 2,000 crore (nominal) through price based auction; and (iv) “8.83 percent 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 July 20, 2012 (Friday).

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