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Bond yields edge lower after government cancels Rs 15,000 crore debt sale auction

06 Feb 2014 Evaluate

Bond yields edged lower after the central bank late on Wednesday stated that the government had cancelled its previously deferred bond sale of Rs 15,000 crore, which hinted at latter’s confidence of achieving fiscal deficit target of 4.8 percent of GDP for 2013-14. Additionally, the yields also edged lower after India's central bank conducted a much-awaited government bond switch.

On the global front, U.S. Treasuries yields rose on Wednesday on caution before Friday's highly anticipated payrolls number, which could pause a rally that has sent yields to their lowest levels since early November if jobs growth comes in strong. Meanwhile, Brent crude held steady above $106 a barrel on Thursday as worries over global economic growth dented the demand outlook.

Back home, the yields on new 10 year Government Stock 2023 were trading 3 basis points lower at 8.68% from its previous close of 8.71% on Wednesday

The benchmark five-year interest rate swaps were trading steady at its previous close of 8.37% on Wednesday.

Late on Wednesday, RNI announced that on review of the Government of India (GoI)’s cash position and funding requirement, it was decided to cancel the deferred auction scheduled on January 17, 2014 amounting Rs 15,000 crore, which would result in decrease in Government market borrowing programme for 2013-14 to that extent.

The Government of India, earlier had announced that the sale (re-issue) of three dated securities for Rs 10,000 crore on February 7, 2014, including (i) 8.12% Government Stock 2020 for a notified amount of Rs 3,000, (ii) 8.83% Government Stock 2023 for a notified amount of Rs 5,000 and lastly (iii) 8.32% Government Stock 2032 for a notified amount of Rs 2,000.    

Further, RBI announced that securities from 2014-15 and 2015-16 maturity buckets for face value of about Rs 27,000 crore have been successfully switched to longer tenor security with an institutional investor last week.

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