Bond yields ease on approval for overhaul of foreign investment rules

26 Jun 2013 Evaluate

Bond yields eased for second consecutive session on Wednesday largely hurt from the overhaul of rules for foreign investors, including easing registration procedures and simplifying categories, by the market regulator on Tuesday. However, prevailing caution ahead of the Jan-March Balance of Payments (BoP) data, due Friday are likely to keep the price gains in check.

In a bid to attract vital flows needed to narrow a record high current account deficit, Securities and Exchange Board of India (SEBI) approved an overhaul of rules for foreign investors. Now overseas investors will be classified into a newly created Foreign Portfolio Investors category as long as their equity stake in a company does not exceed 10 percent. Purchases above that amount by a single investor will be governed under Foreign Direct Investment rules on the global front.

US Treasuries prices stabilised in Asian trade on Wednesday after yields rose sharply overnight as data, including housing, consumer confidence and business spending plans, suggested the U.S. economy was gaining momentum. Meanwhile, Brent crude eased on Wednesday after strong US economic data supported plans by the Federal Reserve to scale back its stimulus later this year, cutting the flow of cheap central bank money that has boosted market liquidity.

Back home, the yields on 10-year 7.16% - 2013 bonds were trading 2 basis points lower at 7.48% from its previous close of 7.46% on Tuesday.

The benchmark five-year interest rate swaps were trading 1 basis point higher at 7.31% from its previous close of 7.30% on Tuesday.

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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