Mumbai: The federal bond yields eased on Monday as a drop in local shares prompted investors to pick up bargains in safe-haven government debt.
Yields, however, ended off the day’s lows after a finance ministry official said the government had no plans to go slow on its fiscal first-half borrowing schedule.
The 10-year benchmark bond yield ended at 7.08%, above the day’s low of 7.04%. It ended at 7.11% on Friday. It is up 8 basis points so far this month.
Volumes were a heavy Rs74.95 billion ($1.5 billion) on the central bank’s trading platform. Dealers said 10-year was attractive to buy at 7.10-11% levels.
“The stock market crash prompted some buying in government securities,” said Anoop Verma an associate vice president at Development Credit Bank.
Shares dropped 4.1% in their biggest fall since the budget in early July, as worries about the pace of global economic recovery sparked a broad sell-of in equity markets across the world.
Some dealers said sharp falls in the stock market would reduce the chances of the central bank raising rates, as it would dent company profits at a time when the economy is showing early signs of recovery.
The government, which usually announces debt sale for the following week on every Friday, had set only Rs65 billion of treasury bill auction for Tuesday, as a result of which yields fell in early deals on Monday.
However, after market hours on Monday, the government said it would sell Rs120 billion of bonds on Friday.
Cash conditions in the money market were ample with overnight rates quoting between 3.2-3.3%, around the floor of the money market corridor, and the central bank mopped up Rs1.14 trillion at its daily money market operations.
Five-year benchmark swap rates closed at 6.33-6.38%, below Friday’s close of 6.40-6.45%.
Oil fell to below $66 a barrel on Monday, touching its lowest this month and US 30-year Treasury bonds gained over a full point in price on Monday as investors became more cautious about the pace of global economic recovery.