Indian bond yields steady, cash support steps eyed
Wednesday, 23 June 2010
MUMBAI, June 22 (Reuters): Federal bond yields Tuesday were steady after rising in early deals as Monday's bond buyback auction was partly successful, but hopes of further steps by the central bank to ease the cash crunch supported prices.
At 10:24 a.m. (0454 GMT) the yield on the 10-year benchmark bond was at 7.57 per cent, unchanged from its previous close, after rising to 7.60 per cent in early deals. Volumes were a low $703.7 million on the central bank's trading platform.
"The market sentiment is slightly weak as there were expectations for a reduction in this week's auction size and the buyback was a disappointment," said a trader at STCI Primary Dealer. However, a further upside to yields was prevented as fears of an imminent rate hike had abated, he added.
The benchmark 10-year bond yield is down 12 basis points from a 5-week high touched last week, after a higher-than-expected inflation data raised concerns of an off-cycle policy tightening.
The Reserve Bank of India (RBI) bought back 8.07 billion rupees of bonds under its open market operations, compared with a target of 100 billion rupees via a multiple price auction, it said late Monday.
The efforts by India's central bank to infuse cash into the system through buying back bonds were only partly successful as banks Monday asked for sharply higher than market prices for the papers, dealers said. The government will sell 150 billion rupees of bonds on June 25, it said Monday.
Traders were not overly concerned about the tight cash conditions as they expected the issue to be resolved soon. "Liquidity coming back to system is only a matter of time," said Bekxy Kuriakose, head of fixed income at L&T Investment Management.
Most traders expect cash levels to return to normal by July. The one-year overnight indexed swap (OIS) rate rose to 5.43 per cent, from Monday's close of 5.39 per cent and from the 19-month peak of 5.62 per cent hit last Friday.
At 10:24 a.m. (0454 GMT) the yield on the 10-year benchmark bond was at 7.57 per cent, unchanged from its previous close, after rising to 7.60 per cent in early deals. Volumes were a low $703.7 million on the central bank's trading platform.
"The market sentiment is slightly weak as there were expectations for a reduction in this week's auction size and the buyback was a disappointment," said a trader at STCI Primary Dealer. However, a further upside to yields was prevented as fears of an imminent rate hike had abated, he added.
The benchmark 10-year bond yield is down 12 basis points from a 5-week high touched last week, after a higher-than-expected inflation data raised concerns of an off-cycle policy tightening.
The Reserve Bank of India (RBI) bought back 8.07 billion rupees of bonds under its open market operations, compared with a target of 100 billion rupees via a multiple price auction, it said late Monday.
The efforts by India's central bank to infuse cash into the system through buying back bonds were only partly successful as banks Monday asked for sharply higher than market prices for the papers, dealers said. The government will sell 150 billion rupees of bonds on June 25, it said Monday.
Traders were not overly concerned about the tight cash conditions as they expected the issue to be resolved soon. "Liquidity coming back to system is only a matter of time," said Bekxy Kuriakose, head of fixed income at L&T Investment Management.
Most traders expect cash levels to return to normal by July. The one-year overnight indexed swap (OIS) rate rose to 5.43 per cent, from Monday's close of 5.39 per cent and from the 19-month peak of 5.62 per cent hit last Friday.