Re, bonds stay flat, all eyes on inflation

MUMBAI: Liquidity was one of the best in many weeks on Wednesday with banks parking over Rs 67,000 crore with the RBI. The benchmark bond and the rupee ended largely unchanged from Tuesday���s close, echoing the uncertainty in both the markets. While the 10-year bond ended at a yield of 5.90%, up 5 basis points, the rupee ended at Tuesday���s close of 48.82 against the dollar.

Dealers spoke with nervousness about further borrowings being announced this fiscal. The federal government sold Rs 9,500 crore of treasury bills at a weekly auction on Wednesday. ���The next move in the bonds will depend on what kind of borrowings the government will announce around the vote-on-account,��� said Prasanna Patankar, senior vice-president at STCI Securities. ���If most of the extra borrowings are done through the T-bill route, then bonds may rally,��� he said. All eyes are now on the latest inflation data due around noon on Thursday.

On the rupee front, strong upswing in stock market buoyed hopes for inflows, but dollar demand from importers slowed the rise. The rupee at one point was up at 48.57. The dollar picked up on Wednesday, market sentiment surging for the dollar, thus also contributing to the rupee decline. Overnight call money rates were mostly steady on Tuesday as banks had adequate funds for reserve needs. They ended at 4.10%, near the reverse repo rate.