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Bond yields tad lower on Thursday; downside limited in absence of any OMO announcement

21 Feb 2013 Evaluate

Bond yields edged tad lower on the back of strong demand at the foreign institutional investor debt limit sale. India's auction of quotas allowing foreign investors to buy bonds enticed robust demand, reflecting expectations that the central bank will cut interest rates and that the government will deliver a fiscally disciplined budget. However, absence of an open market operation announcement so far this week has limited any sharp downside to yields.

Meanwhile, the auction attracted Rs 78,177 crore worth of orders for its debt auction limits, which gives foreign investors the right to invest in debt up to the limit bought. On the global front, US 10-year Treasuries inched higher in Asian trade on Thursday, but its gains were limited as weakness in equities stirred some safe haven bids for bonds. Meanwhile, oil extended losses for a second session on Thursday, with Brent slipping toward $115 a barrel after market rumours that a hedge fund was forced to liquidate substantial commodity positions led to the fuel's largest daily fall in 2013 the previous day.

Back home, the yields on 10-year 8.79% - 2021 bonds were trading lower by 1 basis point at 7.79% from its previous close of 7.80% on Wednesday.

The benchmark five-year interest rate swaps were trading 1 basis point lower at 7.25% from its previous close of 7.26% on Wednesday.

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