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Bond yields edge lower on absence of OMO this week

25 Sep 2013 Evaluate

Bond yields edged lower on absence of open market operation (OMO) this week and large supply including two auctions. However, Bond prices received some support from the government's decision to stick to its budgeted market borrowing of Rs 2.35 trillion for the second half of the fiscal year, despite a slowdown in revenue, signalling its intent to narrow the fiscal deficit.

On the global front, U.S. Treasury prices rose on Tuesday for the third straight session after weaker economic data reinforced expectations the Federal Reserve will not scale back stimulus in the near term. Meanwhile, brent crude oil futures climbed above $109 a barrel on Wednesday as investors remained sceptical whether relations between the United States and Iran would thaw amid new talks over the OPEC nation's nuclear program.

Back home, the yields on 10-year 7.16% - 2023 bonds, were trading 4 basis points higher at 8.80% from its previous close of 8.76% on Tuesday.

The benchmark five-year interest rate swaps were trading 3 basis points higher at 8.45% from its previous close of 8.42% on Tuesday.

Government of India announce the sale of four dated securities for ` 14,000 crore on September 27, 2013. (i) “8.12 percent Government Stock 2020” for a notified amount of `3,000 crore (nominal) through price based auction; (ii) “8.28 percent Government Stock 2027” for a notified amount of `6,000 crore (nominal) through price based auction;(iii) “ New 17-yr Government Stock 2030” for a notified amount of `2,000 crore (nominal) through yield based auction, and (iv) “8.83 percent Government Stock 2041” for a notified amount of `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 September 27, 2013 (Friday).

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