Govt bond yields fall on RBI's surprise bond buy

Mumbai: Government bond yields are seen falling 10-15 basis points on Friday, the last trading day of the current fiscal year, as traders may rush to cover short positions after the Reserve Bank of India unexpectedly offered to buy debt, including the 10-year benchmark.

The 10-year benchmark bond yield is expected to open below 8.50 percent and move in a band of 8.45 to 8.55 percent during the session. It had closed at 8.61 percent on Thursday, 1 basis point lower on the day.

Post trading hours on Thursday, the Reserve Bank of India said it will buy up to 100 billion rupees of bonds through open market operations (OMO) on Friday. Other papers to be bought are 7.99 percent 2017, 7.83 percent 2018 and 8.08 percent 2022 bonds.

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[caption id=“attachment_260503” align=“alignleft” width=“380” caption=“The RBI’s surprise move will give rise to hopes it would announce more such bond buys in the coming weeks. Reuters”]  [/caption]

The RBI’s surprise move will give rise to hopes it would announce more such bond buys in the coming weeks to ease the liquidity and support the market through the huge government borrowing for 2012/13, which is expected to push bond prices up, traders said.

The government is scheduled to raise Rs 3.7 rupees in April-September, of its projected gross borrowing target of 5.7 trillion for 2012/13.

Reuters