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Bond yields witness a sharp plunge; trading band for govt bonds widened for second time today

28 Jun 2013 Evaluate

Bond yields witnessed a sharp plunge on Friday on account of bond-rally, widely fuelled by recovery in the rupee and short-covering by traders. Additionally, US treasuries also weighed on the sentiment. Meanwhile, trading bands for government bonds for Friday were widened for a second time today. The Fixed Income Money Market and Derivatives Association of India (FIMMDA) on its website reported that the new trading bands for government bond yields would be 30 basis points, 20 bps and 15 bps across tenors. Earlier in the day, it had widened the bands to 25 basis points, 17.5 bps and 12.5 bps across tenors.

On the global front, U.S. Treasuries extended gains in Asia on Friday, after a stronger-than-expected sale of seven-year bonds the previous day improved market sentiment following the sharp sell-off sparked by expectations of an end in the Federal Reserve's stimulus. Meanwhile, Brent crude oil futures rose above $103 a barrel on Friday and are set for the first monthly rise in five months, after comments from Federal Reserve governors that the U.S. central bank is in no rush to curtail its massive bond-buying programme

Back home, the yields on 10-year 7.16% - 2013 bonds were trading 10 basis points lower at 7.46% from its previous close of 7.56% on Thursday.

The benchmark five-year interest rate swaps were trading 8 basis points lower at 7.34% from its previous close of 7.42% on Thursday.

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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