Bonds hit 1-year low, rupee gets repo boost
Bond prices slumped to a one-year low on Thursday, in response to the Reserve Bank of India’s decision to hike the repo rate by 25 basis points late on Wednesday evening.
By ET Bureau |
Bond prices slumped to a one-year low on Thursday, in response to the Reserve Bank of India���s decision to hike the repo rate by 25 basis points late on Wednesday evening. The repo rate ��� the rate at which banks borrow from the RBI under daily operations ��� was hiked to 8%, reports Our Bureau in Mumbai.
Despite the rate hike, banks borrowed funds worth Rs 20,000 crore from the central bank on Thursday, on account of tight liquidity conditions and rising rates in the overnight cash market, where rates had crossed the 8% mark during the day.
The yield on the 10-year benchmark paper rose to 8.39% levels (the highest in an year) during the day. However, the market sentiment recovered later after better-than-anticipated industrial output figures were announced.
A senior dealer with a private sector bank said, ���To an extent, some amount of uncertainty has ebbed off after the repo rate hike. Now, the market is awaiting the release of inflation data on Friday with another eye on liquidity conditions next week after advance tax payments happen.���
Bond dealers estimate that the 10-year benchmark yield would settle in the range of 8.25-8.35% over the next few days.
The rupee gained some strength against the dollar, riding on the repo rate hike. However, rising oil prices globally, amid a fall in the local equity market curbed further gains.
Overnight call rates remained high on account of tight cash conditions. Rates on the inter-bank call market ended the day at 8.10% .
Despite the rate hike, banks borrowed funds worth Rs 20,000 crore from the central bank on Thursday, on account of tight liquidity conditions and rising rates in the overnight cash market, where rates had crossed the 8% mark during the day.
The yield on the 10-year benchmark paper rose to 8.39% levels (the highest in an year) during the day. However, the market sentiment recovered later after better-than-anticipated industrial output figures were announced.
A senior dealer with a private sector bank said, ���To an extent, some amount of uncertainty has ebbed off after the repo rate hike. Now, the market is awaiting the release of inflation data on Friday with another eye on liquidity conditions next week after advance tax payments happen.���
Bond dealers estimate that the 10-year benchmark yield would settle in the range of 8.25-8.35% over the next few days.
The rupee gained some strength against the dollar, riding on the repo rate hike. However, rising oil prices globally, amid a fall in the local equity market curbed further gains.
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The rupee ended the day at 42.83/84 levels per dollar, stronger than the Wednesday���s close of 42.86/87. Premia in the forward market inched up sharply. The yield on the six-month contract ended at 2.90%, sharply rising from the previous close of 2.16% while that on the one-year contract closed at 2.44% (1.87%). Overnight call rates remained high on account of tight cash conditions. Rates on the inter-bank call market ended the day at 8.10% .
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