Yields Clamber Up On Omo Announcement

Yields on both government securities and corporate bonds headed northwards today as the Reserve Bank of India (RBI) scheduled an open market operation (OMO) for Monday.

Yield of the benchmark 10 year gilt edged up by seven basis points to be last dealt at 6.446 per cent and that of the benchmark five year corporate bond was up by nine basis points to be last dealt at 6.512 per cent.

The yield correction, in fact, started Thursday as the central bank made its intentions known that it was uncomfortable with the yields. The markets were weighed down by fears of an OMO auction since the beginning of trading.

The RBI said that it will sell the 10.95 per cent 2011 bond from its portfolio for Rs 4500 crore via a uniform price auction on Monday.

A spokeswoman for the Reserve Bank of India (RBI) also told a wire agency that the government would likely raise the size of a bond issue scheduled for next week to Rs 5000 crore from the original target of Rs 4000 crore.

The tentative date for the federal issue of 15- to 20-year bonds is December 5. Prices of medium and long-tenor gilts fell by 50 paise and 75 paise respectively even as trading in the market was volatile.

Yield of the benchmark 10 year gilt opened at 6.378 per cent (Rs 107.15), touched an intra-day high of 6.474 per cent (Rs 106.45), before finishing at 6.446 per cent (Rs 106.65). Yield of the benchmark five year corporate bond rose to 6.512 per cent from the previous day