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Bond yields soar tracking Rupee weakness

26 Aug 2013 Evaluate

Bond yields soared higher tracking weakness in the rupee and as the central bank sticks to its sale of Rs 22,000 crore of cash management bills during the week. On the currency front, Indian rupee breached the 64 level to plunge to the low of 64.22 against the US dollar after strong recovery on Friday, due to increased demand for the American currency from importers and some banks.

On the global front, U.S. Treasuries yields fell from two-year highs on Friday after weak housing data raised concerns that rising mortgage rates may weigh on the economic recovery, boosting demand for U.S. government debt and leading investors betting on further yield increases to cover their positions. Meanwhile, Brent crude extended gains above $111 a barrel on Monday to a near five-month high, as rising tensions over a suspected chemical weapons attack in Syria added to concerns that increased unrest in the Middle East could disrupt supply.

Back home, the yields on 10-year 7.16% - 2023 bonds, which were trading 5 basis points higher at 8.31% against its previous close of 8.27% on Friday.

The benchmark five-year interest rate swaps were trading 3 basis points higher at 8.44% from its previous close of 8.41% on Friday.

The Government of India has announced the sale (re-issue) of “1.44% Inflation Indexed Government Stock-2023” for a notified amount of Rs 1,000 crore through price based auction. The auction will be conducted using uniform price method on August 27, 2013 (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 5,000 crore respectively. The auction will be conducted on August 28, 2013 using 'Multiple Price Auction' method.

Eleven State Governments have offered to sell 10 year securities by way of auction for an aggregate amount of Rs 8,605 crore on August 27, 2013

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