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Bond yields tread water on account of overnight surge of US treasury yields, lower rupee

03 Dec 2013 Evaluate

Bond yields were almost treading water tailing overnight surge of US treasury yields and Rupee’s depreciation against dollar amidst speculation the Federal Reserve will trim its debt purchases as soon as this month. On the currency-front, Rupee also weakened on the account of slide of local equities that was due to 0.6% decline of Core industries' output data, which occupies 37.9% weight in the overall Index of Industrial Production (IIP). However, 3 years low Q2 Current Account Deficit (CAD), also weighed on the sentiment.

On the global front, US Treasury yields approached a seven-year high against their German counterparts and the most in 31 months versus Japanese bonds amid speculation the Federal Reserve will trim its debt purchases as soon as this month after U.S. Institute for Supply Management's index of national factory activity rose in November to its best showing since April 2011, while the pace of hiring also accelerated. Meanwhile, brent crude held steady above $111 a barrel on Tuesday, just off an 11-week high hit the previous day, on an improving demand outlook after recent strong global economic numbers and also worries of lower supplies.

Back home, the new 10 year Government Stock 2023 was trading 1 basis point higher at 8.75% from its previous close of 8.74% on Monday. The yields on 10-year 7.16% - 2023 bonds, were trading flat at its previous close of 9.05% 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 December 04, 2013 using 'Multiple Price Auction' method.

The Government of India have announced the sale (re-issue) of four dated securities for Rs 15,000 crore on December 6, 2013, which includes, (i) 7.28 % Government Stock 2019 for a notified amount of Rs 4000 crore, (ii) 8.83 % Government Stock 2023 for a notified amount of Rs 7000 crore, (iii) 8.32 % Government Stock 2032 for a notified amount of Rs 2000 crore and lastly (iv) 8.30 % Government Stock 2042 for a notified amount of Rs 2000 crore.

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