Bond yields edged further higher on Friday after the annual rate of inflation, based on monthly WPI, cooled to multi month low at 4.68% for the month of February, 2014 as compared to 5.05% for the previous month and 7.28% during the corresponding month of the previous year, which further cemented the case for RBI putting key policy rates on hold in upcoming monetary policy on April 1 after easing Retail inflation data.
Nevertheless, the further uptick of yields was unlikely on RBI’s repurchase announcement. To ensure adequate liquidity in the banking system at a time when the quarterly advance tax outgo is coinciding with an Rs 30,000-crore term repo maturity, Reserve Bank of India (RBI) on Thursday evening announced that government on March 18, would be buying back Rs 15,000 crore worth of bonds maturing between May and February 2015 by utilizing "its surplus cash balances" with RBI.
On the global front, longer-dated U.S. Treasuries prices rallied to their highest levels in over a week on Thursday on heightened tensions over a possible U.S.-European response against Russia if a referendum in Ukraine's Crimea region goes ahead. Meanwhile, brent crude held steady above $107 a barrel on Friday, on track for a third weekly loss amid worries over Chinese economic growth and rising U.S. stockpiles, although heightened tension in Ukraine is causing renewed worry over Russian oil supplies.
The yields on new 10 year Government Stock 2023 were trading 3 basis points higher at 8.77% from its previous close of 8.74% on Thursday.
The benchmark five-year interest rate swaps were trading 1 basis point higher at 8.45% from its previous close of 8.44% on Thursday.