Bonds cautious before RBI rate meet, holidays

MUMBAI: Bonds were steady on Monday as falling oil prices failed to lift sentiment in a market dogged by uncertainty over whether RBI will raise interest rates next week. Traders said higher short-term rates, caused partly by more demand for funds from corporates to make bonus payments for Diwali, were also prompting investors to pare holdings.

Inter-bank call money rates ended over 7%, more than 100 basis points higher than when funds are abundant in the banking system, and analysts said with some cash injection, such as new government spending, rates would remain firm. The yield on benchmark 10-year bonds ended at 7.65%, unchanged from Friday’s close. Volume was on the lower side at Rs 1,400 crore, compared with Rs 2,000-3,500 crore usually. The bond market will be shut on Tuesday and Wednesday for holidays.