Bond yields soar to 15 months high on Rupee’s slide

14 Aug 2013 Evaluate

Bond yields surged to highest level in nearly 15 months, tracing the sharp depreciation of Indian currency ahead of the release of July inflation data. Street is widely expecting July wholesale price index to have risen slightly to 5% from a year earlier, hitting the ceiling of the Reserve Bank of India's perceived comfort zone. On the currency front, Indian rupee, after getting a brief respite on Tuesday, once again resumed its depreciating streak on Wednesday, despite a series of steps undertaken by the government to curb the current account deficit, on account of higher dollar demand from importers amidst the strength of American greenback in the overseas market.

On the global front, U.S. Treasuries yields approached two-year highs on Tuesday after data suggested Europe's struggling economy may have turned the corner and a resilient U.S. consumer sector would generate faster growth in the second half of the year. Meanwhile, brent crude slipped towards $109 per barrel on Wednesday as investors fretted that the U.S. Federal Reserve could start curbing its commodity-friendly stimulus as early as September, but concerns over supply underpinned prices.

Back home, the yields on 10-year 7.16% - 2023 bonds were trading 9 basis points higher at 8.49% from its previous close of 8.40% on Tuesday.

The benchmark five-year interest rate swaps were trading 9 basis points higher at 8.68% from its previous close of 8.59% on Tuesday.

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.

The Government of India have announced the sale (re-issue) of four dated securities for Rs 16,000 crore on August 16, 2013, including (i) “7.28 percent Government Stock 2019” for a notified amount of Rs 4,000 crore (nominal) through price based auction; (ii) “7.16 percent Government Stock 2023” for a notified amount of Rs 6,000 crore (nominal) through price based auction;(iii) “8.28 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 3,000 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 August 16, 2013 (Friday).

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