Banks in demand as bond yields slide

State Bank of Mysore (up 10.58%), State Bank of Travancore (up 5.82%),

State Bank of Bikaner (up 5.77%), Yes Bank (up 2.28%), Allahabad Bank (up 2.26%), IndusInd Bank (up 2.22%), Indian Overseas Bank (up 2%), Axis Bank (up 1.79%), Canara Bank (up 1.76%), Punjab National Bank (up 1.71%), Corporation Bank (up 1.48%), ICICI Bank (up 1.35%), Andhra Bank (up 1.31%), Bank of Baroda (up 1.14%), Kotak Mahindra Bank (up 1.10%), UCO Bank (up 1.04%), Central Bank (up 0.96%), IDBI Bank (up 0.92%), State Bank of India (up 0.91%), Federal Bank (up 0.87%), Dena Bank (up 0.71%), United Bank of India (up 0.55%), Jammu & Kashmir Bank (up 0.49%), Oriental Bank of Commerce (up 0.42%), Syndicate Bank (up 0.41%), HDFC Bank (up 0.29%), Indian Bank (up 0.19%), Vijaya Bank (up 0.08%) and Bank of India (up 0.04%), edged higher.

The BSE Bankex was up 1.06% at 14,708.74. It outperformed the Sensex, which was up 0.71% at 19,719.38.

The BSE Bankex had outperformed the market over the past one month till 1 January 2013, rising 4.32% compared with the Sensex's 1.25% rise. The index had also outperformed the market in past one quarter, rising 10.96% as against Sensex's 4.02% rise.

According to media reports, bond yields dropped 12 basis points in the first two days of the week as the central bank deferred a bond sale due this week to the week ending 22 February 2013.

On 31 December 2012, the Reserve Bank of India (RBI) announced that the auction of dated securities for Rs 12000 crore scheduled in the week ending 4 January 2013, has now been shifted to the week ending 22 February 2013.

A surge in bond prices, which move inversely to yields, will boost the value of bond holdings of banks. Profits from trading in government bonds form a substantial part of revenue of commercial banks.

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