Re flat; bonds down on oversupply fears
Bonds tumbled on Thursday, with both new and old 10-year benchmarks crossing the 7%-mark on concerns that the market may not be able to absorb fresh supplies of bonds slated to hit the market in the coming days.
By ET Bureau |
MUMBAI: Bonds tumbled on Thursday, with both new and old 10-year benchmarks crossing the 7%-mark on concerns that the market may not be able to absorb fresh supplies of bonds slated to hit the market in the coming days. The Reserve Bank of India (RBI) bought back bonds worth around Rs 8,000 crore, but at much higher yields than what the market had expected.
According to dealers, this indicates traders were desperate to vacate their positions. As per a release, RBI is to sell securities worth Rs 12,000 crore on Friday. Dealers expect prices to remain under pressure in coming days. The rupee ended at 51.88 against the dollar ��� largely unchanged from Monday���s close ��� as the stock market remained choppy while dollar buying from importers capped gains in the local currency.
The yield on the old 10-year benchmark 8.24% paper maturing in 2018 traded 27 basis points higher at 7.10%. The new benchmark 6.05% paper expiring in 2019 ended higher at 7%. The rupee shed some of its early gains as dollar itself trimmed losses against the yen after US data showed retail sales were better than expected.
RBI bought bonds expiring in 2017 (at a cut-off yield of 7.25%), 2021 (at 7.67%), 2032 (at 8.05%) and 2032 (at 8.15%.) This was much more than what the market expected implying that traders sold their bonds cheap, reflecting their poor outlook on debt.
India���s industrial output fell 0.5% in January from a year earlier, inflation rose 2.43% by end-February from a year earlier, government data showed. Both numbers were largely in line with market expectations. ���Inflation and IIP numbers have become secondary compared with details of buyback and auction of securities,��� says Ramkumar K, head of fixed income at BNP Paribas Asset Management.
According to dealers, this indicates traders were desperate to vacate their positions. As per a release, RBI is to sell securities worth Rs 12,000 crore on Friday. Dealers expect prices to remain under pressure in coming days. The rupee ended at 51.88 against the dollar ��� largely unchanged from Monday���s close ��� as the stock market remained choppy while dollar buying from importers capped gains in the local currency.
The yield on the old 10-year benchmark 8.24% paper maturing in 2018 traded 27 basis points higher at 7.10%. The new benchmark 6.05% paper expiring in 2019 ended higher at 7%. The rupee shed some of its early gains as dollar itself trimmed losses against the yen after US data showed retail sales were better than expected.
RBI bought bonds expiring in 2017 (at a cut-off yield of 7.25%), 2021 (at 7.67%), 2032 (at 8.05%) and 2032 (at 8.15%.) This was much more than what the market expected implying that traders sold their bonds cheap, reflecting their poor outlook on debt.
India���s industrial output fell 0.5% in January from a year earlier, inflation rose 2.43% by end-February from a year earlier, government data showed. Both numbers were largely in line with market expectations. ���Inflation and IIP numbers have become secondary compared with details of buyback and auction of securities,��� says Ramkumar K, head of fixed income at BNP Paribas Asset Management.
Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
ADVERTISEMENT
