Bond yields fall on bullish auction cut-offs

Bond yields fell on Friday taking comfort from bullish auction cut-offs, but the finance minister’s comments that India will keep unwinding economic stimulus checked the falls.

The yield on the 10-year benchmark bond ended at 7.52%, down 5 bps from its previous close. The 2020 bond traded in a wide band of 7.59-7.51% during the day. There was a freak trade at 7.67%, dealers said.

Volume was a robust Rs 13,655 crore ($2.9 billion), compared with Thursday’s Rs 9,270 crore on RBI’s trading platform.

The benchmark 10-year bond yield rose intra-day 2 basis points to 7.57% in afternoon trade. The 2020 bond yield had fallen by 2 basis points to 7.55% after the central bank set better-than-expected cut-offs at the Rs 13,000-crore auction. The bank set a cut-off of 7.6965% at the 7.02%, 2016 bond, which was lower than a forecast of 7.7007% in a Reuters poll earlier in the day.

The benchmark five-year interest rate swap ended at 6.58/62% from its previous close of 6.58/61. In interest rate futures on NSE, the June contract implied an yield of 8.1902% while the September contract was not traded.