Bond yields rise on auction demand concerns

Bond yields rise on auction demand concerns
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First Published: Wed, Aug 01 2007. 10 30 AM IST
Updated: Wed, Aug 01 2007. 10 30 AM IST
Mumbai: Indian federal bond yields inched up on Wednesday (1 August) as investors worried about a lack of demand at this week’s bond auctions after the Reserve Bank of India (RBI) increased banks’ reserve requirements and as oil prices head higher.
At 9:30 a.m. the 10-year bond yield to 7.86% from Tuesday’s (31 July) close of 7.84%. It was 10 basis points above Monday’s close.
The RBI will auction Rs65 billion of bonds and treasury bills on 1 August, and the government is selling Rs100 billion of bonds on 3 August.
“Oil is near the $78 per dollar mark, and the market will take cues from today’s auction results,” said a local trader. On Tuesday (31 July), the RBI raised the cash reserve ratio (CRR) to 7.0% from 6.5%, with effect from 4 August, taking it to its highest since November 2001. It said the move would absorb Rs160 billion ($4 billion) from the banking system.
It also scrapped a cap of Rs30 billion on its daily money market operations, enabling banks to park more funds with it, but kept its key interest rates unchanged.
Traders said yields on shorter-dated bills and bonds are likely rise further in coming days after a sharp sell-off on 31 July.
The yield on the 91-day treasury bill rose to 6% on 31 July from 4.2% at Monday’s (30 July) close, and the one-year swap rate rose to 7.22% after the policy decision from 6.77% at Monday’s (30 July) close. -------------------------------------------------------------
MARKET SNAPSHOT,10,18,38,49
Bombay Sensi tive Index BSESN
Indian rupee INR=IN
($1=Rs40.4)
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First Published: Wed, Aug 01 2007. 10 30 AM IST