Bonds snap 2-day falls to end up; strong demand at FII debt quota sale
Government bonds snapped two days of falls and rose marginally on Wednesday after a news report said the finance ministry may issue a new 10-year bond.
By PTI | Updated:
MUMBAI: Government bonds snapped two days of falls and rose marginally on Wednesday after a news report said the finance ministry may issue a new 10-year bond only after the budget is finalised but investors refrained from adding larger positions ahead of the outcome of debt limit sale for foreign investors.
Shortly after the auction outcome at 1200 GMT, sources told Reuters the auction was aggressively bid for 93.61 billion rupees ($1.58 billion), above the Rs 71.52 billion on offer. The cut-off was set at 4.8 basis points, the sources said.
Earlier in the day, news agency NewsRise quoted a senior finance ministry official as saying the government is likely to issue a new 10-year bond only after its borrowing plan is finalised, sending the 10-year yields down 4 basis points to 8.54 per cent from 8.58 perc ent earlier.
Last week, Reuters had reported the central bank may issue a new 10-year bond later this month, citing two officials involved with the plans. For most of the session, yields were stuck in a range as traders were on the sidelines ahead of the unutilised debt limit auction for foreign institutional investors ( FIIs).
"I think the underlying momentum continues to be positive but bonds are consolidating because the FII limits got hit, and incrementally we will only see FIIs coming through auctions," said Laxmi Iyer, head of fixed income and products at Kotak Mutual Fund.
The benchmark 10-year bond yield ended down 2 basis points at 8.54 per cent, after earlier hitting a high of 8.60 per cent. Intraday, traders cited little impact from the outcome of the treasury bill auction, as the cutoffs were largely in line with expectations. The market was also little changed after data showed India's exports surged at their strongest pace in six months, rising 12.4 per cent in May over the previous year. The benchmark five-year swap rate ended up 2 bps at 7.82 percent and the one-year rate rose 1 bp to 8.24 per cent.
Shortly after the auction outcome at 1200 GMT, sources told Reuters the auction was aggressively bid for 93.61 billion rupees ($1.58 billion), above the Rs 71.52 billion on offer. The cut-off was set at 4.8 basis points, the sources said.
Earlier in the day, news agency NewsRise quoted a senior finance ministry official as saying the government is likely to issue a new 10-year bond only after its borrowing plan is finalised, sending the 10-year yields down 4 basis points to 8.54 per cent from 8.58 perc ent earlier.
Last week, Reuters had reported the central bank may issue a new 10-year bond later this month, citing two officials involved with the plans. For most of the session, yields were stuck in a range as traders were on the sidelines ahead of the unutilised debt limit auction for foreign institutional investors ( FIIs).
"I think the underlying momentum continues to be positive but bonds are consolidating because the FII limits got hit, and incrementally we will only see FIIs coming through auctions," said Laxmi Iyer, head of fixed income and products at Kotak Mutual Fund.
The benchmark 10-year bond yield ended down 2 basis points at 8.54 per cent, after earlier hitting a high of 8.60 per cent. Intraday, traders cited little impact from the outcome of the treasury bill auction, as the cutoffs were largely in line with expectations. The market was also little changed after data showed India's exports surged at their strongest pace in six months, rising 12.4 per cent in May over the previous year. The benchmark five-year swap rate ended up 2 bps at 7.82 percent and the one-year rate rose 1 bp to 8.24 per cent.
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