RBI governor’s rate hike signal lifts yields; Rupee dips 13 paise
Bond yields edged up, after Reserve Bank of India (RBI) governor D Subbarao said the central bank may raise rates sooner than other countries, even as the central bank bought bonds from traders at rates in line with market expectations.
By ET Bureau |
MUMBAI: Bond yields edged up, after Reserve Bank of India (RBI) governor D Subbarao said the central bank may raise rates sooner than other countries, even as the central bank bought bonds from traders at rates in line with market expectations.
The yield on the 10-year benchmark bond ended at 7.43%, above Wednesday���s closing of 7.34%, as the central bank said on Thursday it had bought back bonds worth Rs 4,300 crore through an auction under its open market operation where it received bids totalling nearly Rs 12,000 crore.
The buyback auction was held a day ahead of an auction to sell Rs 11,000 crore of government bonds. Traders expect it to be successfully as primary dealers bid at very low rates (1.5-5 paisa/bond as per RBI) for underwriting the sale.
The central bank has been consistently buying back far less than the targeted amount at auctions (Rs 6,000 crore in every auction) and dealers expect this trend to continue.
RBI bought back over Rs 3,000 crore of the 6.07% bonds maturing in 2014 at a cut-off price corresponding to a yield of 7.14%, roughly what dealers expected. The central bank has, so far, bought back nearly Rs 51,000 crore of bonds since the start of the fiscal year in April from the Rs 80,000-crore target for the period between April-September.
In the currency market, the rupee gave up early gains to close 13 paisa lower at 48.64 against the dollar, as stocks dipped and dollar strengthened globally.
Action in the corporate bond market is slowly picking up steam, as corporates realise rates are steadily peaking out.
Neyvelli Lignite raised Rs 200 crore through six-month maturity commercial paper where LKP Securities was the sole arranger. Recently, HPCL & REC has also raised money through CP route. Banks, too, are frantically raising
tier-II bonds on fears that rates may rise from here. Bank of India raised Rs 500 crore by issue of upper tier-II capital bonds, with a coupon rate of 8.50%.
However, volumes on interest rate futures are slowly falling. On the National Stock Exchange (NSE), volumes were only Rs 35 crore on Thursday, with the December contract ending flat at 8.14%.
The yield on the 10-year benchmark bond ended at 7.43%, above Wednesday���s closing of 7.34%, as the central bank said on Thursday it had bought back bonds worth Rs 4,300 crore through an auction under its open market operation where it received bids totalling nearly Rs 12,000 crore.
The buyback auction was held a day ahead of an auction to sell Rs 11,000 crore of government bonds. Traders expect it to be successfully as primary dealers bid at very low rates (1.5-5 paisa/bond as per RBI) for underwriting the sale.
The central bank has been consistently buying back far less than the targeted amount at auctions (Rs 6,000 crore in every auction) and dealers expect this trend to continue.
RBI bought back over Rs 3,000 crore of the 6.07% bonds maturing in 2014 at a cut-off price corresponding to a yield of 7.14%, roughly what dealers expected. The central bank has, so far, bought back nearly Rs 51,000 crore of bonds since the start of the fiscal year in April from the Rs 80,000-crore target for the period between April-September.
In the currency market, the rupee gave up early gains to close 13 paisa lower at 48.64 against the dollar, as stocks dipped and dollar strengthened globally.
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Action in the corporate bond market is slowly picking up steam, as corporates realise rates are steadily peaking out.
Neyvelli Lignite raised Rs 200 crore through six-month maturity commercial paper where LKP Securities was the sole arranger. Recently, HPCL & REC has also raised money through CP route. Banks, too, are frantically raising
tier-II bonds on fears that rates may rise from here. Bank of India raised Rs 500 crore by issue of upper tier-II capital bonds, with a coupon rate of 8.50%.
However, volumes on interest rate futures are slowly falling. On the National Stock Exchange (NSE), volumes were only Rs 35 crore on Thursday, with the December contract ending flat at 8.14%.
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