Bond yields ease with RBI’s Rs 12,000 crore buyback plan

Bond yields eased in early deals on Tuesday as traders took a heart out of RBI's move to buy bonds via an open market operation. Bond yields also spiked up due to global risk aversion as fears of Greece exit from Eurozone haunted investor’s mind.

Consistent with the stance of monetary policy and based on the current assessment of prevailing and evolving liquidity conditions, the Reserve Bank has decided to conduct Open Market Operations by purchasing government securities for an aggregate amount of Rs 12,000 crore on May 18, 2012 through multi-security auction using the multiple price method.

On the global front, US Treasury prices firmed up in Asia on Tuesday, with benchmark yields wallowing around their lowest levels since October, as fears over the future of Greece's austerity steps and continued participation in the euro zone prompted investors to seek the safety of government debt. Greek party leaders will gather on Tuesday to hear the proposal of President Karolos Papoulias. If a compromise can't be reached, the country will face another election at which the anti-austerity leftists are likely to emerge victorious. Meanwhile, Brent crude futures fell towards $111 a barrel on Tuesday as Greece's political and economic turmoil deepened and worries that the debt-laden country could leave the euro zone sparked a sell-off in dollar-denominated commodities.

Back home, the yields on 10-year benchmark 8.79% - 2021 bonds edged 4 basis points lower to 8.48% from its previous close of 8.52% on Monday.

The benchmark five-year interest rate swaps fell 4 basis point at 7.44% from its previous close of 7.48% on Monday.

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 10,000 crore and Rs 5000 crore respectively. The auction will be conducted on May 16, 2012 using 'Multiple Price Auction' method.

Government of India announced the sale of four dated securities for Rs 15,000 crore on May 18, 2012, which include, (i) “8.19 percent Government Stock 2020” for a notified amount of  Rs 4,000 crore (nominal) through price based auction, (ii) “9.15 percent Government Stock 2024” for a notified amount of   Rs 7,000 crore (nominal) through price based auction (iii) “8.97 percent Government Stock 2030” for a notified amount of  Rs 2,000 crore (nominal) through price based auction and (iv) “8.83 percent Government Stock 2041” for a notified amount of  Rs 2,000 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 May 18, 2012 (Friday).