Bond yields were trading flat with positive bias investors stayed wary about adding positions ahead of the central bank's policy next week. The Reserve Bank of India (RBI), which has raised rates a dozen times since mid-March 2010, is set to review policy on October 25 and the possibility of another increase has gained momentum after inflation remained high in September.
On the global front, U.S. Treasury debt prices rose on Monday as Germany poured cold water on hopes of a quick solution to the European debt crisis, driving investors back into safe-haven assets. U.S. 30-year Treasuries jumped more than 2 points in price as key U.S. stock indexes closed about 2 percent lower. Meanwhile, brent crude futures were steady above $110 on Tuesday, as the market weighed the impact of chinese economic data on demand in the world's second-largest oil consumer.
The yields on 10-year benchmark 7.80% - 2021 bonds 2021 bonds were trading at 8.76% from 8.75% previous close.
The benchmark five-year interest rate swaps were trading at 7.40% from 7.43% on Monday.
The Reserve Bank of India has announced the auction of 364-day and 91-day Government of India Treasury Bills for notified amount of Rs 4,000 crore each respectively. The auction will be conducted on October 19, 2011 using 'Multiple Price Auction' method.
Meanwhile, Eleven State Governments announced Auction of State Development Loans 2021 on October 18, 2011 for an aggregate amount of Rs 7585.420 crore.
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