Bond yields down, rupee closes flat
Bond yields dipped on Tuesday, even as trading volumes were low and liquidity remained tight. Yields on the 10-year benchmark bond ended the day at 8.57%, easing from Monday’s close of 8.64%
By ET Bureau |
Bond yields dipped on Tuesday, even as trading volumes were low and liquidity remained tight. Yields on the 10-year benchmark bond ended the day at 8.57%, easing from Monday���s close of 8.64%. Market sentiment has eased off since RBI governor���s comments on Monday, which signalled a gradual tightening in the monetary policy, reports reports Our Bureau in Mumbai.
���Though volumes on the market were low, there was some amount of buying interest,��� said a dealer with a private bank. Interestingly, rates on the overnight index swaps (OIS) rose on Tuesday. The OIS market is considered by many to be a better indication of where interest rates are headed, and generally move in the same direction as the G-Secs. ���Banks probably took up positions in G-Secs because of SLR-requirements,��� said the dealer.
However, the sentiment in the bond market continues to be bearish, with tight cash conditions and uncertainty about the interest rate scenario. Banks borrowed Rs 38,730 crore from the central bank through repo operations of its liquidity adjustment facility. This is the second day in a row that banks have borrowed such huge amounts from the RBI. According to market participants, this amount is much higher than usual because inter-bank call-rates have been quoting at 8.30% levels ��� 30 basis points above RBI���s repo rate.
Rates in the inter-bank call market ended the day at 8.10% after transactions worth Rs 18,210 crore were carried out. Collateralised borrowing rates ended the day at 8.01% after transactions worth Rs 28,439 crore were made. Repo rates ended the day at 7.90% after transactions worth Rs 11,605 crore were made.
Meanwhile, the central bank intervention continued in the forex market, which kept the rupee from crossing the 43-per dollar mark. The rupee ended the day unchanged from its previous close at 42.96/97 against the dollar.
According to market sources, the central bank has been consciously protecting the 43-mark. ���There has been consistent demand for dollars from foreign banks, and there has been considerable dollar-outflow from foreign investors as well, but nationalised banks have been selling dollars at weaker levels,��� said a trader with a private bank.
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At the same time, forward premia on near-term contracts rose, with exporters picking up positions to hedge their receivables. Premia on the one-month contract rose to 6.19% (5.50%), while the six month contract rose to 4.16%(3.87%) and the annual contract ended the day at 3.83%(3.63%).Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
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