Bond yields steady as debt auction pressures bond supply increase

Indian government bond yields ended largely unchanged to wrap up the week as the weekly debt auction, which included the benchmark paper, came in largely along expected lines.

 

The benchmark 10-year yield ended at 6.7071 per cent on Friday, compared with its previous close of 6.7103 per cent.

 

New Delhi sold bonds worth Rs 390 billion ($4.49 billion), including Rs 220 billion of the benchmark notes, at levels which were largely in line with estimates.

 

"It seems there is some fatigue in the market, with the benchmark yield seen in a narrow range of 6.68 per cent-6.72 per cent in the near term," a trader with a primary dealership said.

 

 

On the day, the Reserve Bank of India infused durable liquidity of Rs 1.15 trillion  ($13.24 billion) through a 49-day repo and open market operations (OMO), or purchases, of bonds, the quantum for which was doubled the planned amount.

 

The RBI is now scheduled to buy bonds worth Rs 200 billion on February 20. 

 

"I am expecting a similar increase in next week's OMO purchase quantum and post that, the market is anticipating one more calendar of OMO purchases which will run up to the end of March," said VRC Reddy, treasury head at Karur Vysya Bank.

 

The RBI bought bonds worth Rs 400 billion on Thursday, after buying securities worth Rs 200 billion  in January and bonds worth Rs 388.15 billion through secondary market purchases, also in January.

 

It has also infused Rs 1.25 trillion through long-term repos, and around Rs 440 billion rthrough a dollar/rupee swap, taking the total infusion to around Rs 2.68 trillion over the last one month.

 

As the mega liquidity infusion package nears its end, investors are awaiting the next set of measures since liquidity is set to tighten further into the financial year-end in March.  (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)