Bond yields edge lower ahead of November CPI data

Bond yields were trading lower ahead of consumer price data due on Wednesday amidst hopes that lower rate of inflation would allow RBI to unveil early rate cuts. Nevertheless, further slide of yields was unlikely as state run bank’s strike weighed on demand for bonds. On the macro-front, besides November CPI data, October IIP data also is expected to be unveiled later in the day. While, the street widely expects consumer price index (CPI) to be at 6.46%, which is another new low for the index since it started in January 2012, it expects industrial output numbers (IIP) to be at 0.8%. Recently, however, RBI’s deputy governor HR Khan underscored that recent decline in inflation did not mean the decline was permanent. He also emphasized that though decline in crude oil prices and other commodities were beneficial to Indian economy, but policy makers just could not jump their guns until they were convinced the trend was firmly established. On the global front, U.S. Treasuries prices fell on Monday on the view that last Friday's rally was overextended, while traders also sold some U.S. government debt to brace for this week's $66 billion in new supply. Meanwhile, Brent crude fell towards $81 a barrel on Wednesday, holding just above a four-year low as concerns over a mounting oil glut outweighed geopolitical and supply disruption risks in Ukraine and Libya. Back home, the yields on new benchmark 8.40%-2024 bonds was trading 2 basis points lower at 8.17% from its previous close of 8.19% on Tuesday. The benchmark five-year interest rate swaps were trading 2 basis points lower at 7.39% from its previous close of 7.41% on Tuesday. The Reserve Bank of India has announced the auction of 364-day Government of India Treasury Bills for notified amount of Rs 6,000 crore and Rs 8,000 crore respectively. The auction will be conducted on November 12, 2014 using 'Multiple Price Auction' method. The Government of India announce the sale of Four dated securities for Rs 15,000 crore on November 14, 2014, which includes (i) 8.27% Government Stock 2020 for a notified amount of Rs 3000 crore, (ii) 8.40% Government Stock 2024 for a notified amount of Rs 7000 crore, (iii) 9.20% Government Stock 2030 for a notified amount of Rs 2,000 crore and lastly (iv) 9.23% Government Stock 2043 for a notified amount of Rs 3000 crore respectively.