Bond yields treading water ahead of RBI’s bond buyback

Bond yields were treading water in early deals as traders awaited for Rs 12,000 crore bond buyback and Rs 15,000 crore worth debt sale auction, later in the day for cues. Meanwhile, movement in oil prices and possible currency interventions in FX markets are being watched for direction.

On the global front, US Treasuries were treading water in Asia on Friday, well-supported by qualms about Greece and Spain as well as mounting doubts about the strength of the US economy. Meanwhile, Brent crude plunging sub $107 per barrel on Friday, dipped to its lowest in 2012 as a deteriorating euro zone crisis amidst weak US economic data raised fears of a global slowdown that could dent oil demand. Worries about the euro zone, already roiled by Greek political chaos, mounted after Moody's Investor Service downgraded 16 Spanish banks on Thursday, including Banco Santander, which is the euro zone's largest bank.

Back home, the yields on 10-year benchmark 8.79% - 2021 bonds were trading steady at its previous close of 8.49% on Thursday.

The benchmark five-year interest rate swaps dropped 4 basis points to 7.40% from its previous close of 7.44% on Thursday.

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).

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.