Bond yields gain momentum on dented rate cut hopes

16 Jan 2013 Evaluate

Bond yields were trading higher, after sharp down turn witnessed in past few trading sessions, after RBI chief Duvvuri Subbarao’s hawkish comments dented hopes of a 50 basis points rate cut this month.

Tempering the expectations of generous interest rate cuts beginning this month, Reserve Bank of India (RBI) Governor Duvvuri Subbarao underscored that India's inflation has come off a peak but is still high. Although acknowledging the sagging growth of Indian economy, he said, “When growth is slowing down, the economy can be stimulated either by monetary easing or by fiscal stimulus, but both monetary and fiscal side have no room for stimulus.

On the global front, US 10-year Treasuries held firm in Asian trade on Wednesday, after advancing the previous day on traders' increasing concern over the looming fight in Washington to raise the federal debt ceiling. Meanwhile, Brent crude rose towards $111 a barrel on Wednesday on hopes of a revival in demand growth in the world's top oil consuming nation after US retail sales beat forecasts and oil inventories there rose far less than what was expected.

Closer home, the yields on 10-year 8.79% - 2021 were up 3 basis points at 7.86% from its previous close of 7.83% on Tuesday.

The benchmark five-year interest rates were trading 3 basis points up at 7.13% from its previous close of 7.10% on Tuesday.

The Government of India have announced the sale (re-issue) of (i) ‘8.07 percent Government Stock 2017-JUL’ for a notified amount of Rs 3,000 crore (nominal) through price based auction; (ii) ‘8.33 percent Government Stock 2026’ for a notified amount of RS 6,000 crore (nominal) through price based auction; and (iii) ‘8.97 percent Government Stock 2030’ for a notified amount of Rs 3,000 crore (nominal) through price based auction. The auctions will be conducted using multiple price method. The auctions will be conducted by the Reserve Bank of India, Mumbai Office, Fort, Mumbai on January 18, 2013 (Friday).

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