Bond yields inch up on speculation that rates won't be cut soon

Bond yields rose as traders trimmed their portfolios on views that the Reserve Bank of India (RBI) is unlikely to reverse its tight monetary policy stance when it announces the results of a policy review on January 24. In a meeting between bankers and central bank officials on Tuesday, RBI Deputy Governor Subir Gokarn said that lowering the banks' cash reserve ratio would be contradictory to the RBI's anti-inflationary stance. Further, RBI's announcement of a debt buyback is likely to hold back yields from rising further. 

On the global front, US government debt prices drifted little changed on Tuesday,  with the 10-year yield staying below 2 percent as the Treasury's $32 billion sale of three-year notes yielding less than 0.4 percent drew strong demand. While, US crude oil futures slipped below $102 on Wednesday as the euro zone debt crisis continued to weigh on sentiment, but supply concerns triggered by Iran's nuclear program dispute with the West and unrest in Nigeria are expected to check losses. 

The yields on 10-year benchmark 8.79% - 2021 bonds were trading at 8.25% up from its previous close of 8.23% on Tuesday.

The benchmark five-year interest rate swaps was steady at 7.16% from its previous close.

The Government of India have announced the sale (re-issue) of three dated securities for Rs 14,000 crore (i) “New 8 year Security (GS2020) for a notified amount of Rs 4,000 crore (nominal) through yield based auction, (ii) “9.15 percent Government Stock 2024” for a notified amount of Rs 6,000 crore (nominal) through price based auction and (iii) “8.97 percent Government Stock 2030” for a notified amount of Rs 4,000 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 January 13, 2012 (Friday).

The Reserve Bank of India has announced the auction of 91-day and 364-day Government of India Treasury Bills for notified amount of Rs 6,000 crore and Rs 4, 000 crore respectively. The auction will be conducted on January 11, 2012 using 'Multiple Price Auction' method.