Bond yields were trading higher ahead of state loan auctions on Tuesday amid a lack of buying appetite and redemption pressures from mutual funds. Some apprehensions among dealers after the last state-loan auction had a long tail for some states. Moreover, Government bond prices dropped after Reserve Bank of India Governor Raghuram Rajan on February 23, 2014, said that inflation remains the biggest threat to growth.
Meanwhile, four state-owned companies are going to raise around Rs 5250 crore cumulatively next week through tax-free bonds, just ahead of the financial year-end. The debt securities are of 10-15-20-year maturities, carrying interest rates in the range of 8.19-8.88%. The issuers include Indian Railway Finance Corporation for Rs 2900 crore, National Housing Bank for Rs 1000 crore, Rural Electrification Corporation for Rs 1060 crore and Housing and Urban Development Corporation for Rs 285 crore.
On the global front, U.S. Treasury debt prices inched up on Friday as investors questioned whether a string of weaker-than-expected economic data is due to severe weather affecting activity in the short term or a symptom of a more structural economic slowdown. Meanwhile, Brent futures rose above $110 a barrel on Monday, defying losses seen in most other risk assets on expectations of revived demand growth across industralised and emerging nations.
The yields on new 10 year Government Stock 2023 were trading 5 basis points higher at 8.85% from its previous close of 8.80% on Friday
The benchmark five-year interest rate swaps were trading 5 basis points higher at 8.50% from its previous close of 8.45% on Friday.
Reserve Bank of India has announced the auction of 91 and 182-days Government of India Treasury Bills for notified amount of Rs 7,000 crore and Rs 6000 crore respectively. The auction will be conducted on February 26, 2014using 'Multiple Price Auction' method.