Bond yields steady; supplies eyed

Bond yields steady; supplies eyed
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First Published: Mon, Aug 03 2009. 06 37 PM IST
Updated: Mon, Aug 03 2009. 06 37 PM IST
Mumbai: Bond yields were steady on Monday as traders were reluctant to take fresh positions in the backdrop of heavy government debt supplies.
The benchmark 10-year bond yield ended at 7.01%, almost steady at Friday’s close of 7%. It traded in a tight band of 6.96-7.03% during the day.
Volumes were a moderate Rs59.35 billion ($1.2 billion) on the central bank’s trading platform.
The benchmark five-year interest rate swap ended at 6.35/40%, close to Friday’s close of 6.32/37%.
“The outlook on interest rate is a bit clumsy and the market is currently focusing on supplies,” said Mahendra Jajoo, head of fixed income at Tata Asset Management.
After the market closed on Friday, the Reserve Bank of India (RBI) said six states would sell Rs75 billion of 10-year bonds on Tuesday and the government would sell Rs95 billion of treasury bills on Wednesday.
The government will also be selling Rs120 billion worth of debt this Friday.
The government has so far sold over Rs1.89 trillion of bonds since the beginning of the fiscal year starting April.
It plans to borrow Rs4.51 trillion in 2009-10 and complete 66% of it in the April-September period.
Traders said the secondary market had become unattractive now as they could buy bonds in the primary market auctions at cheaper prices.
“Economic recovery is still at a nascent stage and we are miles away from the stage at which monetary tightening should begin,” Jajoo said.
Growth in India’s manufacturing activity held steady in July, helped by robust local demand, but intense competition curbed companies’ pricing power even as raw material costs jumped, a survey showed.
Separately, data published by the government showed exports fell an annual 27.7% in June to $12.8 billion, its ninth straight monthly fall.
The 10-year benchmark yield is likely to show correlation on multiple fronts, like crude oil prices and US Treasury yields, during the week and is likely to stay in a range of 6.90-7.05%, Kotak Mahindra Bank said in a note on Monday.
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First Published: Mon, Aug 03 2009. 06 37 PM IST
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