Bonds stay in range; rupee loses 38 paise

MUMBAI: Government bonds traded range-bound, ahead of the Reserve Bank of India���s (RBI) move to buy back securities worth Rs 6,000 crore from traders on Thursday. On Friday, RBI will sell bonds worth Rs 15,000 crore.

Dealers expect the market to remain subdued till the Budget, when, they hope, some clarity will emerge on the government���s borrowing programme. However, the most commonly-traded bond ��� the 5-year bond ��� ended higher, boosted by the buyback news. Its yield closed at 6.61%, 4 basis points lower than its previous close. When yields fall, prices rise.

���Our estimate is that the 10-year bond would continue to trade in the 6.75-7% range,��� said Aneesh Srivastava, chief investment officer at IDBI Fortis Life Insurance. ���Let���s wait for cues on the borrowing programme from the Budget. If it���s not too harsh, then we could see some trading opportunities,��� he added.

Meanwhile, 10 states have announced an auction of their 10-year State Development Loans (SDLs) for an aggregate amount of Rs 5,950 crore on June 23. The rupee weakened to a one-month low on Wednesday, weighed down by an downswing in the local stock market despite the dollar���s weakness overseas.

The rupee ended at 48.14 against the dollar, nearly 1%, or 38 paisa, weaker than Tuesday���s close of 47.76. The euro edged up on Wednesday, tracking a recovery in oil prices, while the dollar slipped after Russia���s call for a diversified monetary system kept the pressure on the greenback.

���The recent election outcome, revival in global risk appetite and a pickup in capital inflows into India positively affect balance of payments,��� Macquarie analyst Rajeev Malik said in a note to clients. ���We reiterate our rupee-dollar forecasts of 46 by the end of 2009, strengthening further to 43 by June, 2010.���