Bond yields tread water in absence of any more scheduled auctions for current fiscal year

Bond yields were mostly steady on Monday as trader’s refrained from taking large position in the absence of any more scheduled auctions in the current fiscal year that ends March 31. However, yields are likely to find support from state-owned banks, which will likely prop-up their balance sheets before the financial year close on March 31, 2012.

The government, in its budget for 2012/13, said it will borrow Rs 570,000 crore from the market, higher than the expected Rs 530,000 crore.

On the global front, US Treasuries prices fell for an eighth consecutive day on Friday and yields touched four-month highs as optimism the economic recovery was gaining momentum undermined the safe-haven allure of US government debt.  Meanwhile, Brent crude was steady near $126 a barrel on Monday, extending previous session's gains, as prices were supported by continued concerns over a potential supply disruption from Iran and the prospect of a stronger US economy lifting oil demand.

The yields on 10-year benchmark 8.79% - 2021 bonds were steady at its previous close of 8.42%, as lack of supply soothed sentiment, and some demand was seen from state-run banks.

The benchmark five-year interest rate swaps edged lower at 7.60% from its previous close of 7.62% on 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 8,000 crore and  Rs 4,000 crore respectively. The auction will be conducted on March 21, 2012 using 'Multiple Price Auction' method.

Additionally, five State Governments has announced Auction of State Development Loans 2022 for Rs 1216.00 crore on March 20, 2012