August IIP data remains as non-event for bond markets

Bond yields continued trading range-bound as better-than-expected August industrial output data emerged as a non-event. However, investors also preferred cautious approach ahead of Rs 13, 000 crore debt sale auction to be held later in the day.

In a positive surprise, India’s index of industrial production (IIP), a key measure of industrial output registered decent growth of 2.7 per cent in August 2012 at 165.7, lower than the growth rate of 3.4 percent in the corresponding period last year, but way above the consensus estimates of sub 1 percent growth figure. Further, the number was also higher than July month’s negligible growth figure of 0.1 per cent, which was later revised to -0.2 per cent.

On the global front, US Treasuries were supported on Friday with the benchmark 10-year yield staying near this week's low as concerns over corporate earnings and uncertainty over the U.S. presidential election sapped the risk appetite of investor’s. Meanwhile, Brent crude held above $115 a barrel on Friday, trading near four-week highs and on course for its biggest weekly gain in two months, supported by tensions between Turkey and Syria, lower output at North Sea oilfields and upbeat US data

The yields on 10-year benchmark 8.79% - 2021 were trading 1 basis point higher at 8.17% from its previous close of 8.16%.

The benchmark five-year interest rates were trading 3 basis points lower at 7.00% from its previous close of 7.03%.

The Government of India have announced the sale (re-issue) of three dated securities for  Rs 13,000 crore on October 12, 2012, which includes (i) ‘8.07 percent Government Stock 2017-JUL’ for a notified amount of  Rs 3,000 crore (nominal) through price based auction; (ii) ‘8.15 percent Government Stock 2022’ for a notified amount of  Rs 7,000 crore (nominal) through price based auction; and (iii) ‘8.97 percent Government Stock 2030’ for a notified amount of  Rs 3,000 crore (nominal) through price based auction. The auctions, which will be conducted using uniform price method, will be conducted by the Reserve Bank of India, Mumbai Office, Fort, and Mumbai on October 12, 2012 (Friday).