Bond yields slip after newly appointed FM’s comment

07 Aug 2012 Evaluate

Bond yields fell after newly appointed Finance Minister, P Chidambaram promised to create an environment suitable for lower interest rates, besides taking tough measures for fiscal consolidation. This development as taken northing sort of hint to the India’s apex bank to lower it interest rates in the upcoming mid-quarterly policy review in September, after the world’s most aggressive central bank, RBI, prioritizing inflation over growth, has kept the repo rate on hold for two consecutive meetings.

On the global front, US 10-year Treasury bonds were barely changed on Tuesday, as investors adopted a cautious approach ahead of debt sales later in the week amid market jitters over slowing global growth and the euro zone crisis. Meanwhile, Brent crude held steady above $109 a barrel on Tuesday, on hopes that Europe would take further action to tackle its stubborn debt crisis, while supply worries shooting from North Sea maintenance and Middle East tensions also supported prices.

The yields on 10-year benchmark 8.79% - 2021 edged 2 basis points lower at 8.20% from its previous close of 8.22% on Monday.

The benchmark five-year interest rates were trading flat at Monday’s close of 7.03%.

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 5,000 crore respectively, to be conducted on August 08, 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 August 10, 2012, including (i) “8.07% Government Stock 2017-JUL” for a notified amount of Rs 4,000 crore (nominal) through price based auction; (ii) “8.15% Government Stock 2022” for a notified amount of Rs 6,000 crore (nominal) through price based auction; (iii) “8.97% Government Stock 2030” for a notified amount of Rs 3,000 crore (nominal) through price based auction; and (iv) “8.33% Government Stock 2036” for a notified amount of Rs 2,000 crore (nominal) through price based auction. The auctions to be conducted using uniform price method will be held on August 10, 2012 (Friday).

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