Bond yields ebbs in early deals on Monday

Bond yields ebbed in early deals on Monday on hopes of drop in headline inflation which could further cement expectations of a rate cut by the Reserve Bank of India (RBI) when it reviews policy on Tuesday. The median consensus for wholesale price based inflation was of 6.70 per cent for March from a year ago, below the higher-than-expected 6.95 per cent recorded in February.

Meanwhile, India's headline inflation eased marginally in March helped by softening prices of manufactured goods, reinforcing expectations the Reserve Bank of India (RBI) will cut interest rate for the first time in three years on Tuesday to revive economic growth.

However, the yields also got a boost in early trade tailing US Treasury debt prices on risk aversion globally. The US Treasury debt prices rose on Friday, pushing benchmark yields below the key psychological level of 2 percent, as falling stocks and worries over global economic growth fueled appetite for lower-risk assets. Meanwhile, Brent crude futures slipped below $120 on Monday after weak growth numbers from China, the world's No. 2 oil consumer, and a surge in Spanish borrowing costs triggered worries about global economic growth and demand.

Back home, the yields on 10-year benchmark 8.79% - 2021 bonds were  lower at 8.43% from its previous close of 8.46% on Friday.

The benchmark five-year interest rate swaps also trading at 7.49% from its previous close of 7.51% on Friday.

The Reserve Bank of India has announced the auction of 364-day and 91-day Government of India Treasury Bills for notified amount of  Rs 5,000 crore and Rs 9000 crore respectively . The auction will be conducted on April 18, 2012 using 'Multiple Price Auction' method.

Also, Government of Manipur has announced an Auction of State Development Loans 2022 of Rs 75.00 crore on April 17, 2012.