Bond yields edge higher after inclusion of existing 10-year paper in Rs 15,000 crore debt auction

Bond yields edged higher after the central bank said it will re-issue the existing 10-year paper, despite its already large outstanding limit. Meanwhile, the treasury yields also climbed tracing the higher prices of Brent crude.

The Government of India have announced the sale (re-issue) of four dated securities for Rs 15,000 crore on May 25, 2012 (i) “8.24 percent Government Stock 2018” for a notified amount of Rs 4,000 crore (nominal) through price based auction, (ii) “8.79 percent Government Stock 2021” for a notified amount of  Rs 6,000 crore (nominal) through price based auction (iii) “8.28 percent Government Stock 2027” for a notified amount of  Rs 2,000 crore (nominal) through price based auction and (iv) “8.33 percent Government Stock 2036” for a notified amount of Rs 3,000 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 25, 2012 (Friday).

On the global front, the benchmark US Treasury bond prices inched lower in Asia on Tuesday, ahead of a European meeting this week, which majority believe would offer steps to resolve the region's debt crisis. Meanwhile, Brent crude was oscillating above $109 on Tuesday, as markets awaited the results of two meetings to tackle Europe's debt crisis and Iran's nuclear programme, which could affect global oil demand and supply.

Back home, the yields on 10-year benchmark 8.79% - 2021 bonds was trading 2 basis points higher at 8.56% from its previous close of 8.54%.

The benchmark five-year interest rate swaps were trading 2 basis points higher at 7.46% from its previous close of 7.44 on Monday.

Seven state governments have announced the sale of their 10-year State Development Loans (SDLs) for an aggregate amount of Rs 7,300 crore (face value) through yield based auction using multiple price auction method. The auction will be conducted by the Reserve Bank of India (RBI) at Mumbai on May 22, 2012.

The RBI has announced the auction of 91-day and 182-day Government of India Treasury Bills for notified amount of Rs 9,000 crore and Rs 5,000 respectively. The auction will be conducted on May 23, 2012 using ‘Multiple Price Auction’ method.