Bonds rally as RBI raises record Rs20,000 crore

The Reserve Bank of India on Thursday raised Rs20,000 crore through sale of government bonds pushing down yields on benchmark 10-year bonds to 8.93 per cent from 8.97 per cent.

Bond prices firmed up as the bonds of different maturities were fully sold at the close of banking hours today.

The 10-year benchmark bond yield fell 4 basis points to 8.93 per cent from 8.97 per cent. The yield was down 3 bps at the close of trading on Thursday.

The RBI set the cut-off price for the 8.35 per cent 2022 bonds at Rs95.45, yielding 9.1584 per cent, while the cut-off price for the 8.24 per cent 2027 bonds was set at Rs92.05, yielding 9.3122 per cent.

The cut-off for the 9.20 per cent 2030 bonds was set at Rs99.50, yielding 9.2585 per cent, while the cut-off price for the 9.23 per cent 2043 bonds was set at Rs99.27, yielding 9.3004 per cent.

Prices of the 10-year sovereign bonds hit a four-month high after the government auctioned debt at lower than expected yields.

With this, the government also met its target to sell Rs20,000 crore paper due between 2022 and 2043 at maximum yields, ranging from 9.16 per cent to 9.3 per cent, according to an RBI statement.

The central bank also injected additional cash into the financial system through a 15-day term repo auction.

The government expects to meet 62 per cent of the its debt sales target of Rs5,97,000 crore for the financial year ending March 2015 in the April-September period.

The bond sale comes at a time when India's consumer-price inflation quickened to 8.31 per cent in March from a revised 8.03 per cent in February.

Inflation based on the wholesale-price index also accelerated to 5.7 per cent in March from 4.68 per cent in February.

The RBI, which raised interest rates thrice since September to curb inflation, had left its policy rates unchanged at the latest review on 1 April.