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Bond yields edge lower after RBI announces OMO

01 Oct 2013 Evaluate

Bond yields dropped on Tuesday, as Reserve Bank of India (RBI) announced open market purchase of bonds to help liquidity. Post-trading hours on Monday, the RBI said it would buy up to 100 billion rupees of bonds via open market operations on Oct. 7. However, fiscal deficit remains a matter of concern with the gap reaching 75% of the full year target in April-August.

On the global front, U.S. Treasury prices rose modestly on Monday, leaving yields just above their lowest levels in seven weeks, aided by safe-haven bids on worries about a partial government shutdown. Meanwhile, brent crude fell below $108 a barrel on Tuesday to trade near a 7-week low on worries a shutdown of the U.S. government may crimp oil demand, while investors also eyed easing tensions in U.S.-Iran nuclear talks.

Back home, the yields on 10-year 7.16% - 2023 bonds, were trading 6 basis points lower at 8.71% from its previous close of 8.77% on Monday.

The benchmark five-year interest rate swaps were trading 2 basis points lower at 8.33% from its previous close of 8.35% on Monday.

Government of India announce the sale of four dated securities for ` 15,000 crore on October 4, 2013. (i) “7.28 percent Government Stock 2019” for a notified amount of `3,000 crore (nominal) through price based auction; (ii) “7.16 percent Government Stock 2023” for a notified amount of `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 `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 October 4, 2013 (Friday).

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