Bonds tumble after RBI ups repo rates by 25 bps

20 Sep 2013 Evaluate

Bonds, after rising to month’s high level in the previous trading session on Fed’s status quo stance, tumbled after the central bank surprised markets with a hike in the repo rate on Friday, putting its focus squarely back on managing inflation and the fiscal deficit. However, the central bank eased some of the cash tightening steps undertaken since mid-July, lowering the marginal standing facility rate by 75 basis points to 9.5% and the minimum daily average cash balance that banks need to maintain to 95 percent from 99% previously.

On the global front, U.S. Treasury yields rose on Thursday from one-month lows as investors questioned when the Federal Reserve is likely to begin paring its bond purchases, a day after the U.S. central bank shocked markets by keeping its $85 billion a month bond buying program unchanged. Meanwhile, brent crude prices held steady above $108 a barrel on Friday, set for the biggest weekly decline in three months on the return of some Libyan oil output, although supply concerns remained in focus as geopolitical tensions simmered in the Middle East.

Back home, the yields on 10-year 7.16% - 2023 bonds, were trading at day’s high of 8.45%, 26 basis points higher from its previous close of 8.19% on Thursday.

The Government of India have announced the sale (re-issue) of four dated securities for Rs 15,000 crore on September 23, 2013 (i) “7.28 percent Government Stock 2019” for a notified amount of Rs 3,000 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) “8.32 percent Government Stock 2032” for a notified amount of `3,000 crore (nominal) through price based auction, and (iv) “8.30 percent Government Stock 2042” for a notified amount of Rs 3,000 crore (nominal) through price based auction. The auctions will be conducted using uniform price method. In partial deviation from the Issuance Calendar for marketable dated securities for April-Sept 2013 wherein period September 16-20, 2013 was indicated for the auction of dated securities, auctions for the week September 16-20, 2013 will be conducted by the Reserve Bank of India on September 23, 2013 (Monday).

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