Bond yields skyrocket as Fed signals end to stimulus

20 Jun 2013 Evaluate

Bond yields skyrocketed on Thursday on account of large bond sell-off after Fed said that it may start scaling back its $85 billion a month in bond purchases this year and end them by mid-2014. Trading in some government debt securities was halted earlier in the day due to circuit breakers, but was later resumed after the country's fixed income association sought the central bank's approval to raise the upper trading limits.

On the global front, weak Chinese manufacturing data on Thursday helped put a floor under US Treasuries prices, which steadied after first extending losses in Asia in the wake of Federal Reserve Chairman Ben Bernanke's signal that the US central bank could begin tapering its asset-purchasing stimulus later this year. Meanwhile, oil slipped nearly $2 on Thursday, its biggest daily slide in close to three weeks, as slowing Chinese manufacturing activity unnerved investors already worried about the US Federal Reserve's plan to roll back its stimulus later this year.

Back home, the yields on 10-year 7.16% - 2013 bonds were trading 10 basis points higher to 7.36% from its previous close of 7.26% on Wednesday.

The benchmark five-year interest rate swaps were trading 23 basis points higher at 7.18% from its previous close of 6.95% on Wednesday.

The Government of India have announced the sale (re-issue) of four dated securities for Rs 15,000 crore on June 21, 2013 (i) “7.28 percent Government Stock 2019” for a notified amount of Rs 3,000 crore (nominal) through price 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 uniform price method. The auctions will be conducted by the Reserve Bank of India, Fort, Mumbai on June 21, 2013(Friday).

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