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Bond yields tumble mirroring the sharp fall in US treasury yields and oil prices

09 Aug 2011 Evaluate

Bond yields fell on Tuesday mirroring the sharp fall in the US treasury yields and crude oil prices. Further, the hopes that Reserve Bank of India may end its tightening cycle sooner than expected as concerns over global economy heighten also spurred buying in local bonds. The finance minister yesterday also drew a silver lining for the country saying that the crisis could result in softening of international commodity prices, especially fuel which would help rein in inflation.

On the global front, U.S. Treasury prices soared on Monday after the first credit downgrade of U.S. debt caused investors to flee risky assets in favor of bonds on concern over the ripple effects of the ratings cut. Meanwhile, Brent crude plunged to a six-month trough below $99 a barrel on Tuesday in a two-session drop of more than $10, and U.S. crude fell to a 10-month low after a U.S. credit downgrade intensified fears about a global slowdown in demand for resources.

The yields on 10-year benchmark 7.80% - 2021 fell to 8.19% from its previous close of 8.26% on Monday.

The benchmark five-year interest rate swaps were trading lower at 7.02% from its previous close of 7.16% on Monday.

Meanwhile, Seven State Governments have announced Auction of State Development Loans 2021 for Rs 7500.000 crore on August 9, 2011.

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 7,000 crore and Rs 3000 crore respectively. The auction will be conducted on August 10, 2011 using 'Multiple Price Auction' method.

The Government of India has announced the sale of three dated securities for Rs 12,000 crore on August 12, 2011, which includes, (i) “7.83% Government Stock 2018” for a notified amount of Rs 3,000 crore (nominal), (ii) “7.80 percent Government Stock 2021” for a notified amount of Rs 6,000 crore (nominal) and (iii) “8.30 percent Government Stock 2040” for a notified amount of Rs 3,000 crore (nominal) through price based auctions.

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