Bond yields rise ahead of auction supply and Fed comments

23 May 2013 Evaluate

Bond yields rose in tandem with a fall in US Treasury. The yields on benchmark 10-year Treasury note rose above the key two percent level on Wednesday, the highest level in two months on Federal Reserve Chairman Ben Bernanke's testimony. Further, domestic factors like absence of an open market operation (OMOs) and auction supply on Friday are also affecting bonds.

On the global front, US Treasury yields on the benchmark 10-year note rose above the key two percent level on Wednesday, the highest level in two months, as Federal Reserve Chairman Ben Bernanke added to bond investor fears that the US central bank might slow its bond purchases later this year, if the economy improves further. Meanwhile, Oil prices fell on Wednesday as rise in US gasoline inventories prompted selling, extending losses in late trading after minutes from a Federal Reserve policy meeting sent US stock markets down.

Back home, the yields on 10-year 8.79% - 2021 bonds were trading 2 basis points higher at 7.39% from its previous close of 7.37% on Wednesday, while the new 10-year paper is trading 1 basis point higher at 7.17% against its previous close.

The benchmark five-year interest rate swaps were trading 4 basis points higher at 6.81% from its previous close of 6.74% on Tuesday.

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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