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Bond yields shoot up after RBI’s latest move to tighten rupee liquidity

24 Jul 2013 Evaluate

Bond yields spiked up after the central bank's move to tighten rupee liquidity further in an attempt to shore up the weak local currency, which edged up just modestly despite the measures. Meanwhile, Fixed Income Money Market and Derivatives Association of India (FIMMDA) said there would be no trading bands for government bonds and other securities on Wednesday.

On the global front, US Treasuries prices stayed low on Tuesday after the U.S. government sold new two-year notes in an uneventful auction, the first sale in $99 billion of supply this week. Meanwhile, brent futures slipped towards $108 on Wednesday as weak China data renewed concerns over demand growth from the world's second-biggest oil consumer.

Back home, the yields on 10-year 7.16% - 2023 bonds were trading 32 basis points higher at 8.49% from its previous close of 8.17%.

The benchmark five-year interest rate swaps rose 22 basis points higher to 8.40% from its previous close of 8.18% on Tuesday.

Meanwhile, the Reserve Bank of India has announced the auction of 364 and 91-days Government of India Treasury Bills for notified amount of Rs 5,000 crore and Rs 7000 crore respectively. The auction will be conducted on July 24, 2013 using 'Multiple Price Auction' method.

The Reserve Bank of India has announced the auction of the 56 and 28 days Government of India Cash Management Bills for a notified amount of Rs 3,000 crore each. The auction will be conducted on July 25, 2013 (Thursday) using 'Multiple Price Auction' method.

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