Bonds face pressure on RBI talk, Re gains 23 p

MUMBAI: Government bonds came under pressure after RBI deputy governor Rakesh Mohan called for a reducing surplus liquidity once global recovery starts. In a paper ���Emerging Contours of Financial Regulation: Challenges and Dynamics���, the outgoing deputy governor said: ���As the global economy starts recovery, a calibrated exit from this unprecedented accommodative monetary policy will have to be ensured to avoid the recurrence of the financial crisis being experienced now.���

Government bonds fell ahead of Friday���s Rs 15,000-crore auction, with bond houses selling securities to raise cash to participate in the auction. Although the 10-year benchmark paper���s yield rose 14 basis points to end at 6.78%, it was not the most commonly-traded paper in the market. The rupee traded within a 10-paisa range, ending 23 paisa higher than its previous close at 47.25.

���The market is expecting that the government would continue to issue more debt than what it originally budgeted,��� said Piyush Wadhwa, head of G-Sec trading at ICICI Securities Primary Dealership. ���It is likely that they will frontload a large part of the borrowing programme, by scheduling most of the sales in the first half of the year,��� he added.

Meanwhile, a dated security will be redeemed later this week, releasing around Rs 22,600 crore into the system. Advance tax payments due next week might, however, could pressurise the call money rate for a few days, dealers said. The rupee traded in a very narrow 10 paisa range and was largely steady in the course of the day. It had dropped to a low of 47.80 earlier this week, its weakest since May 28.