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Bond yields tumble on central bank's buyback plan

17 Nov 2011 Evaluate

Bond yields tumbled on Thursday, a day after the central bank said it would buy back bonds worth up to $2 billion from the market in an attempt to ease the current cash crunch in the banking system. After the market closed on Wednesday, the Reserve Bank of India said it would conduct open market operations OMOs Purchase of G-Securities for Rs  10,000 crore on November 24, 2011. Bond yields also plunged as the demand for safe heaven bond shot up post the government raised the ceiling on foreign institutional investment in federal and corporate bonds. 

On the global front, US Treasuries prices rose on Wednesday as stock market losses and fear Europe's debt crisis would widen fed a bid for safe-haven US government debt.

The yields on new 10-year benchmark 8.79% - 2021 bonds 2021 were trading at 8.79%, substantially lower from its previous close of 8.88% on Wednesday.

While, the benchmark five-year interest rate swaps were trading at 7.25% from its Wednesday's close of 7.31%.

The Government of India have announced the sale (re-issue) of three dated securities for Rs 13,000 crore on November 18, 2011 (i) “7.83 percent Government Stock 2018” for a notified amount of Rs 4,000 crore (nominal), (ii) “8.79 percent Government Stock 2021” for a notified amount of Rs 6,000 crore (nominal) and (iii) “8.28 percent Government Stock 2027” for a notified amount of Rs 3,000 crore (nominal) through price based auctions. The auctions will be conducted using uniform price method. 

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