Bond yields edge higher on RBI’s latest steps to stem unprecedented slide in the currency

12 Aug 2013 Evaluate

Bond yields were trading higher, as the RBI in a bid to stem an unprecedented slide in the currency, pledged to curb the supply of cash. The Reserve Bank of India will auction Rs 22,000 crore of cash-management bills every Monday, it said in a statement on August 8. While, the first sale - a tranche of 35 days cash management bills for Rs 11000 crore will take place later in the day, another sale of 34 days cash management bills for Rs 11000 crore is scheduled for Tuesday.

However, the further uptick of bond yields is limited on account of Rupee’s appreciation. Indian rupee appreciated to one week high level in morning deals after the central bank took more measures to curb the supply of cash in a bid to stem an unprecedented slide in the currency. It also gained some strength on expectation that Finance Minister P. Chidambaram will announce measures to draw in foreign inflows in a bid to narrow down the record current account deficit that is the key source of pressure on the rupee. Additionally, gains of local equities also worked in the favour of local unit.

On the global front, U.S. Treasury debt prices rose in light volume on Friday, aided by a lack of new supply and by the stock market's struggle to advance from near record-high levels. Meanwhile, brent crude dropped toward $108 per barrel on Monday after a sharp rally in the previous session, while investors waited for a slew of U.S. data this week for hints on when the Federal Reserve will start paring back its stimulus.

Back home, the yields on 10-year 7.16% - 2023 bonds were trading 10 basis points higher at 8.22% from its previous close of 8.12% on Thursday.

The benchmark five-year interest rate swaps were trading 16 basis points higher at 8.45% from its previous close of 8.29% on Thursday.

The Reserve Bank of India has announced the auction of 91 and 182 days Government of India Treasury Bills for notified amount of Rs 7,000 crore and Rs 5000 crore respectively. The auction will be conducted on August 14, 2013 using 'Multiple Price Auction' method.

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