MUMBAI: Indian federal bond yields fell on Thursday as the choice of securities for the central bank's up to 100 billion rupee ($2.04 billion) buying programme on Friday buoyed traders.
The securities 8.24 percent 2018 bonds, 8.20 percent 2022 bonds, 9.15 percent 2024 bonds and 8.28 percent 2032 bonds are actively traded and should be fully accepted, traders said.
The Reserve Bank of India is set to buy the bonds as part of its open market operations to help ease tight liquidity condition.
At 11:02 a.m. (0532 GMT), the 10-year benchmark bond yield was at 8.12 percent, down 2 basis points from its previous close, after touching 8.10 percent matching the nine-month low hit on Wednesday, according to Thomson Reuters data.
"Continued RBI's open market operations would keep the yields subdued," said Nagaraj Kulkarni, senior rates strategist, Standard Chartered Bank in Mumbai.
The RBI has bought about 719 billion rupees of bonds via open market operations since late November in a bid to offset the supply glut created by the government's massive borrowing plan for 2011-12.
It has also released about 320 billion rupees of liquidity into the banking system by cutting the cash reserve ratio, the proportion of deposits that banks keep with the RBI.
"Right now the market is waiting to see if the RBI would do open market operations every week," a trader with a foreign bank said. "If it does, the 10-year yield could slip below 8 percent."
The one-year swap rate was down 2 basis points at 8.09 percent, while the benchmark five-year swap rate fell 4 basis points to 7.26 percent.
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