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Market Commentary
Indian Government bonds close sharply lower - ICICI Bank : Treasury Research
Posted On : 2013-06-20 21:06:03( TIMEZONE : IST )
Indian Government bonds opened sharply lower, with the new benchmark yield around 10 bps higher triggering a lower trading circuit in the early session. Losses in US Treasuries coupled with significant weakness in the Rupee weighed on the gilts. Concerns over FII debt inflows amidst speculation over tapering of Fed's asset purchases further added to the losses. Meanwhile, the FII debt limit auction conducted today was under subscribed, with total bids received to the tune of INR 391 bn as against an offer of INR 420 bn. The old benchmark 8.15% 2022 bond yield closed at 7.64%, compared to yesterday's close of 7.47% while the new 7.16% 2023 ended the day at a record low of 7.40%, as against yesterday's close of 7.26%.
India's call rate closed at 7.20% as against previous close of 7.25%. The RBI injected INR 717.40 bn (gross) into the banking system today, as against INR 603.40 bn (gross) yesterday.
US Treasuries witnessed sharp losses amidst increased speculation over scaling back of Fed's quantitative easing going ahead this year. The benchmark 10-year yield had jumped by 17 bps yesterday, the biggest intraday rise since October 2011 following comments by Fed Chairman Bernanke that policymakers may see it fit to "moderate the pace of asset purchases later this year" if the incoming data are consistent with the Fed's forecasts. The upward revision in Fed's economic assessment added to growth optimism and further aided expectations of scaling back of bond-buying sooner than expected. The Fed sees 2014 GDP growth in the range of 3% to 3.5% compared with a 2.9% to 3.4% estimate made in March while it revised downwards the unemployment rate to 6.5-6.7% for 2014, from the earlier forecast of 6.7-7.0%. Fed expects inflation to ease further in the near term as against its March projections. The 10-year yield is currently trading at 2.44%, the highest level since August 2011 compared to previous close of 2.35%. (17:30 IST)