Bond yields edge lower on RBI’s choice of paper in upcoming Rs 15,000 crore debt auction

28 May 2013 Evaluate

Bond yields edged lower as dealers cheered the choice of papers at the bond auction by the central bank. The RBI will issue Rs 6,000 crore of the new 10-year paper, which will increase its outstanding and is expected to correct its price, bringing it closer to the yield curve. The new 10-year last closed at 7.12%, and has not been traded yet.

The Government of India have announced the sale (new/re-issue) of four dated securities for Rs 15,000 crore on May 31, 2013 (i) “New 6– year Government Stock 2019” for a notified amount of Rs 3,000 crore (nominal) through yield based auction; (ii) “7.16 percent Government Stock 2023” for a notified amount of Rs 6,000 crore (nominal) through price based auction; (iii) “8.97 percent Government Stock 2030” for a notified amount of Rs 3,000 crore (nominal) through price based auction and (iv) “8.83 percent Government Stock 2041” 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 31, 2013 (Friday).

On the global front, US Treasuries slipped in Asian trade on Tuesday as equities firmed, ahead of this week's sales of $99 billion in new coupon-bearing debt. Meanwhile, Brent crude held below $103 per barrel on Tuesday amid worries about the global economy and ample supply, while some traders said the onset of the summer driving season in top oil consumer the United States may support prices.

Back home, the yields on 10-year 8.79% - 2021 bonds were trading 1 basis point lower at 7.33% from its previous close of 7.34% on Monday.

The benchmark five-year interest rate swaps were trading 2 basis points higher at 6.79% from its previous close of 6.77% on Monday.

The Reserve Bank of India has announced the auction of 91 and 364 day Government of India Treasury Bills for notified amount of Rs 7,000 crore and Rs 5,000 crore respectively. The auction will be conducted on May 29, 2013 using 'Multiple Price Auction' method.

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