Bond yields down a tad, auction cut-offs help

Bond yields ended marginally down on Friday, taking comfort from cut-offs at a $1.3 billion debt auction, which came mostly in line with expectations.

The most-traded 8.08% 2022 bond yield ended at 8.04%, down 2 basis points from Thursday. The yield on the 12-year , 8.13%, 2022 bond ended at 8.01%, little changed from 8.02% on Thursday. It moved in a narrow 8.00-8 .03% band. The less liquid benchmark 10-year bond yield ended at 7.90%, down 3 basis points. The benchmark five-year swap ended up 7 basis points at 7.70%. It touched 7.73% earlier in the day, its highest since October 6, 2008.

The one-year swap ended at 7.05%, up 9 basis points from Thursday , after touching 7.06% — its highest since October 15, 2008.

The government auctioned Rs 2,000 crore ($443 million) each of 7.17% bonds maturing in 2015, 8.08% 2022 bonds and 8.30% 2040 bonds. The RBI set 8.0434% cut-off on 2022 bonds, while cutoff for the 2015 bonds was at 7.8653%. The cut-off on the 2040 bond was 8.4431%.

“The cut-offs were in line with expectations, which shows that RBI is waiting for liquidity situation to improve before taking a hawkish stance," said a dealer at a private bank.