Bond yields edged lower after the central bank said on Tuesday that it will buy bonds and eased bond-holding rules for banks to ease tight cash conditions. Meanwhile, the RBI took steps to support the beaten-down bond market by providing liquidity to the markets through prudential measures and announcing some buyback of longer-dated bonds. However, traders say stability in the rupee will be the key for bonds from the medium-term perspective.
On the global front, U.S. Treasury prices gained on Tuesday, breaking a week-and-a-half slump, as fears about the Federal Reserve pulling back on its purchases roiled emerging markets, adding a safe-haven bid to U.S. debt and as higher yields lured some buyers. Meanwhile, brent crude eased for a third session out of four to trade under $110 a barrel on Wednesday, reflecting caution among investors waiting for more clues from the U.S. Federal Reserve on its stimulus strategy.
Back home, the yields on 10-year 7.16% - 2023 bonds were trading 69 basis points lower at 8.21%, from its previous close of 8.90% on Tuesday.
The benchmark five-year interest rate swaps were trading 60 basis points lower at 8.35% from its previous close of 8.95% on Tuesday.
The Reserve Bank of India has announced the auction of 364-days 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 August 21, 2013 using 'Multiple Price Auction' method.
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