Bond yields ease on lower GDP growth

Pre GDP Data Scenario:

Bond yields rose higher as the traders trimmed their positions ahead of GDP data and auction on Friday. However, the rise of the yields were curbed by the hawkish comments made by the senior finance ministry who told that he expected the 10-year yield to come down to around 8.2 percent, and said India had no plans to increase its fiscal deficit target for this financial year but that may change if oil prices rise to $130-$140 per barrel.

Traders will also be awaiting the growth data for the March quarter due to be released around in the noon for further cues. The street expectation is that the economy’s annual growth for quarter would remain unchanged from the previous quarter at 8.2%.

The yields on 10-year benchmark; the 7.80%-2021 which ended at 8.43% on Monday, were trading higher at 8.45% On Tuesday.

The benchmark five-year interest rate swaps were trading higher at 8.16% from its Monday’s close at 8.15%.

The Reserve Bank of India has announced the auction of 91-day  and 364-day Government of India Treasury Bills for notified amount of  Rs 8,000 crore and Rs 3,000 crore respectively. The auction will be conducted on June 1, 2011 using 'Multiple Price Auction' method.

The Government of India have announced the sale (re-issue) of three dated securities for Rs 12,000 crore on June 3, 2011, which includes (i) “7.59 percent Government Stock 2016” for a notified amount of Rs 3,000 crore (nominal), (ii) “8.13 percent Government Stock 2022” for a notified amount of Rs 6,000 crore (nominal) and (iii) “8.28 percent Government Stock 2032” for a notified amount of Rs 3,000 crore (nominal) through price based auctions. The auctions will be conducted using uniform price method.

Post GDP Data Scenario:

The 10-year benchmark 7.80 percent, 2021 bond yield were at 8.39 percent, from 8.43 percent at previous close, after government data showed the economy grew by a slower-than-expected 7.8 percent in the March quarter from a year earlier.

The benchmark five-year interest rate swaps were trading lower at 8.08 % from its Monday’s close at 8.15%.

Meanwhile, India’s economic growth eased last quarter as manufacturing and services moderated a slowdown that has yet to curb pressure for more increases in interest rates to damp inflation. Stocks and the rupee pared gains. Gross domestic product rose 7.8 percent in the three months ended March 31 from a year earlier, after a revised 8.3 percent gain in the previous quarter.