Bond yields spike up on increased odds of rate hike in RBIs upcoming monetary policy

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Bond yields spiked up after higher than expected CPI increased the odds of Reserve Bank of India (RBI) hiking rates for second time later this month, i.e., in its quarterly monetary policy on October 29. On the macro-front, inflation based on the Consumer Price Index (CPI), the retail inflation, reversing its two months easing trend, accelerated to 9.84% in September as against 9.52% in the previous month. .

On the global front, US Treasuries declined as Senate leaders made progress in talks on a deal to suspend the debt ceiling through Feburary 7 and fund the government through January 15. Meanwhile, brent oil edged below $111 per barrel on Tuesday ahead of talks over Iran's nuclear programme that might eventually lead to a pick-up in its oil shipments, but the prospect of a U.S. debt deal in Washington provided some support.

Back home, the yields on 10-year 7.16% - 2023 bonds, were trading 10 basis points higher at 8.67% from its previous close of 8.57% on Monday.

The benchmark five-year interest rate swaps were trading 2 basis points higher at 8.16% from the previous close of 8.14% on Monday.

The Reserve Bank of India has announced the auction of 364 and 91 days Government of India Treasury Bills for notified amount of Rs 6,000 crore respectively. The auction will be conducted on October 15, 2013 using 'Multiple Price Auction' method.

The Government of India have announced the sale (re-issue) of four dated securities for Rs 15,000 crore on October 18, 2013, including (i) “7.28 percent Government Stock 2019” for a notified amount of Rs 4,000 crore (nominal) through price based auction; (ii) “7.16 percent Government Stock 2023” for a notified amount of Rs 7,000 crore (nominal) through price based auction;(iii) “8.32 percent Government Stock 2032” for a notified amount of Rs 2,000 crore (nominal) through price based auction, and (iv) “8.30 percent Government Stock 2042” for a notified amount of Rs 2,000 crore (nominal) through price based auction. The auctions will be conducted by the Reserve Bank of India, Fort, Mumbai on October 18, 2013 (Friday).

Source:-Berkeleygains
 
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