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Bond yields marginally down on expectations of rate cut by RBI

03 Jan 2013 Evaluate

Bond yields edged marginally lower as sentiment remained fairly bullish amid expectations of at least a 25 basis point cut in interest rates at the Reserve Bank of India's (RBI) policy review at the end of this month. Further, lack of a bond sale this week and open market purchase of up to Rs 8,000 crore of bonds by the RBI scheduled for December 4 is also seen supporting the yields.

On the global front, US benchmark 10-year Treasury yields hit their highest in over three months on Wednesday after lawmakers approved a deal that prevented a round of automatic budget cuts and tax hikes that could have tipped the world's largest economy into recession. Meanwhile, Brent crude slipped below $112 a barrel on Thursday as investors' focus shifted from a deal to avert the US ‘fiscal cliff’ to rising oil supply and more budget battles ahead in Washington.

Back home, the yields on 10-year 8.79% - 2021 were down 1 basis point at 7.98% from its previous close on Wednesday.

The benchmark five-year interest rates were trading 1 basis point lower at 7.10% from its previous close.

Consistent with the stance of monetary policy and based on the current assessment of prevailing and evolving liquidity conditions, the Reserve Bank has decided to conduct Open Market Operations by purchasing government securities for an aggregate amount of Rs 8,000 crore on January 4, 2013 through multi-security auction using the multiple price method.

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