Bond yields plunge after RBI trims MSF rate further by 50 basis points

08 Oct 2013 Evaluate

Bond yields plunged after Reserve Bank of India, in continuation of calibrated withdrawal of exceptional measures undertaken since July 2013, reduced the marginal standing facility (MSF) rate by a further 50 basis points from 9.5% to 9.0% with immediate effect. Besides, the Apex Bank also decided for providing additional liquidity in the markets through term repos of 7-day and 14-day tenor for a notified amount equivalent to 0.25% of net demand and time liabilities (NDTL) of the banking system through variable rate auctions on every Friday beginning October 11, 2013

On the global front, U.S. Treasury prices rose on Monday as the lack of progress on ending a partial government shutdown heightened concerns about economic growth and a potential stalemate over raising the country's $16.7 trillion debt ceiling. Meanwhile, Brent futures fell slightly but held above $109 a barrel on Tuesday, as oil production in the Gulf of Mexico returned to normal and the U.S. budget crisis continued to cloud the outlook for demand in the world's biggest oil consumer

Back home, the yields on 10-year 7.16% - 2023 bonds, were trading 17 basis points lower at 8.51% from its previous close of 8.68% on Monday.

The benchmark five-year interest rate swaps were trading 15 basis points lower at 8.11% from its previous close of 8.26% on Monday.

The Reserve Bank of India has announced the auction of 91 and 182 days Government of India Treasury Bills for notified amount of Rs 6,000 crore each. The auction will be conducted on October 9, 2013 using 'Multiple Price Auction' method.

The Government of India has announced the sale (Re-issue) of four dated securities for Rs 15,000 crore on October 11, 2013, including (i) “8.12 percent Government Stock 2020” for a notified amount of Rs 4,000 crore (nominal) through price based auction; (ii) “8.28 percent Government Stock 2027” for a notified amount of Rs 6,000 crore (nominal) through price based auction;(iii) “ 9.20 percent Government Stock 2030” for a notified amount of Rs 3,000 crore (nominal) through price based auction, and (iv) “8.83 percent Government Stock 2041” for a notified amount of Rs 2,000 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 11, 2013 (Friday).

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