Bond yields edge lower in range-bound trade on safe haven buying

Bond yields were trading lower in a range-bound trade on caution ahead of Rs 16,000 crore debt sale auction. However, caution ahead of Reserve Bank of India’s monetary policy review, who is likely to keep monetary policy steady in June, given continued concerns about inflation, led to some safe haven buying. On the global front, yields on benchmark US 10-year Treasury notes dropped to their lowest in nearly 11 months on Wednesday, undermined by fall in the German bond market following weak data and more month-end buying from institutional investors. Meanwhile, Brent crude edged up slightly on Thursday, holding near $110 a barrel amid hopes of improved demand from top oil consumer the United States as a sharp drop in the country's gasoline stocks added to recent data pointing to a stronger economy. Back home, the yields on new 10 year Government Stock 2023 were trading 1 basis point lower at 8.69% from its previous close of 8.70% on Wednesday. The benchmark five-year interest rate swaps were trading 3 basis points lower at 8.13% from its previous close of 8.16% on Wednesday. The Government of India have announced the sale of four dated securities for Rs 16,000 crore on May 30, 2014, including (i) 8.35% Government Stock 2022 for Rs 4000 crore, (ii) New 14 Year Government Stock for Rs 7000 crore, (iii) 9.20% Government Stock 2030 for Rs 2000 crore and (iv) 9.23% Government Stock 2043 for a notified amount of Rs 3000 crore.