Bond yields ease to Dec’09 lows in early deals on strong FIIs’ demand for govt debt quotas

21 May 2013 Evaluate

Bond yields eased to December 2009 lows in early deals on Tuesday on account of strong demand from foreign investors at auction of unused debt limits on Monday and expectations of open market operations (OMOs) by the Reserve Bank of India (RBI) boosting demand for debt.

As per some reports, India attracted Rs 10,146 crore worth of orders for quotas to buy government debt from foreign institutional investors (FIIs), far more than the Rs 5,533 crore on offer. Foreign investor’s lined to buy Indian government bonds on Monday, even after Standard & Poor's reiterated its 'negative' outlook on the country.

On the global front, US government debt prices fell on Monday in choppy trading with benchmark yields hovering near two-month highs, as traders waited for further clues on whether US growth will be strong enough for the Federal Reserve to taper its bond purchases. Meanwhile, Brent crude futures steadied near a two-week high, holding around $105 per barrel on Tuesday, as fears over rising Middle East tension offset concern about moderating demand growth to lock prices in a tight range.

Back home, the yields on 10-year 8.79% - 2021 bonds were trading down 2 basis points at 7.32% , after initially dropping to 7.31 percent, its lowest since December 1, 2009 against its previous close of 7.34% on Monday.

The benchmark five-year interest rate swaps were trading 4 basis points lower at 6.69% from its previous close of 6.72% on Monday.

The Reserve Bank of India has announced the auction of 91 and 182 days Government of India Treasury Bills for notified amount of Rs 5,000 crore each. The auction will be conducted on May 22, 2013 using 'Multiple Price Auction' method.

Eleven State Governments have offered to sell dated securities by way of auction for an aggregate amount of Rs 6,480 crore (Face Value) on May 21, 2013

The Government of India have announced the sale (re-issue) of four dated securities for Rs 15,000 crore on May 24, 2013 (i) “8.12 percent Government Stock 2020” for a notified amount of Rs 3,000 crore (nominal) through price based auction; (ii) “8.20 percent Government Stock 2025” for a notified amount of Rs 6,000 crore (nominal) through price based auction;(iii) “8.32 percent Government Stock 2032” for a notified amount of Rs 3,000 crore (nominal) through price based auction, and (iv) “8.30 percent Government Stock 2042” 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, Fort, Mumbai on May 24, 2013 (Friday).

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