Bond yields edge lower on strong bond demand from mutual fund

25 Jun 2013 Evaluate

Bond yields edged lower after higher returns of bonds attracted strong demand from Mutual funds. The yields also slid lower after funds, anticipating redemption pressures at the end of month are switching out of corporate bond funds and turning to more liquid government securities.

On the global front, US Treasuries prices held steady in Asian trade on Tuesday after bouncing back overnight with the benchmark 10-year yield falling from a near two-year high, although investors remained cautious about the Federal Reserve's plan to start rolling back its stimulus. Meanwhile, Brent crude rose above $101 a barrel on Tuesday after recent sharp losses, but a gloomy demand outlook stemming from fears of a liquidity crunch in China and the US Federal Reserve's plans to roll back its stimulus kept a lid on gains.

Back home, the yields on 10-year 7.16% - 2013 bonds were trading 5 basis points lower at 7.47% from its previous close of 7.42% on Monday.

The benchmark five-year interest rate swaps were trading 8 basis points lower at 7.31% from its previous close of 7.23% on Monday.

Meanwhile, the Reserve Bank of India has announced the auction of 91 and 364-days 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 June 26, 2013 using 'Multiple Price Auction' method.

The Government of India have announced the sale (Re-issue) of four dated securities for Rs 14,000 crore on June 28, 2013 (i) “8.12 percent Government Stock 2020” for a notified amount of Rs 3,000crore (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) “7.40 percent Government Stock 2035” for a notified amount of Rs 2,000 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 28, 2013 (Friday).

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