Mumbai: Indian federal bond yields eased on on Wednesday after rising sharply for two days, with a central bank announcement to buy back bonds helping sentiment. Lower US yields and a drop in oil prices also underpinned the market.
After market hours on Tuesday, the central bank said it would buy back Rs75 billion ($1.5 billion) of bonds on Thursday, higher than the Rs60 billion of bonds it used to buy back on alternate weeks since the beginning of the fiscal year in April.
At 11am (0530 GMT), the yield on the most traded 6.07% bond maturing in 2014 was at 6.39%, below Tuesday’s close of 6.46%.
The benchmark 10-year bond, which registered only seven deals, was at 7%, below its previous closing of 7.06%.
Volumes were moderate at Rs35.50 billion ($727.5 million) on the central bank’s trading platform.
“Yields are lower mainly on US cues and also as the central bank has announced a higher bond buyback amount,” a trader at a private bank said.
However, the drop in yields was limited ahead of a Rs150 billion bonds sale on Friday, Rs70 billion more than indicated in the tentative calendar.
The central bank is also due to auction Rs95 billion of treasury bills on Wednesday.
Yields had spiked in the previous days after the federal budget on Monday had outlined a gross market borrowing of Rs4.51 trillion for 2009/10, higher than the Rs3.62 trillion it had planned in its interim budget in February.
US Treasuries prices rose on Tuesday, pushing benchmark yields to six-week lows, as weak stocks enhanced the allure of safe-haven government debt and investors cheered a decent auction of three-year notes.
Oil dropped towards $62 on Wednesday, on course for its sixth consecutive fall and longest losing streak since mid-December, after data showed larger-than-expected builds in US products stocks, reflecting little sign of a recovery in oil demand.