Re rises to 51.71 as bonds crash
Bonds posted their worst losses in weeks on Friday. RBI’s half percentage point cut in the repo rate, followed by an announcement to buy back bonds failed to assuage nervous traders who feared an oversupply of government bonds.
By ET Bureau |
MUMBAI: Bonds posted their worst losses in weeks on Friday. RBI���s half percentage point cut in the repo rate, followed by an announcement to buy back bonds failed to assuage nervous traders who feared an oversupply of government bonds. RBI���s auction of dated securities was undersubscribed and devolved on primary dealers. Both the yield on the old 10-year benchmark 8.24% paper maturing in 2018, and the new benchmark 6.05% paper expiring in 2019 rose dramatically on Friday and ended at 6.75% (up 33 bps) and 6.48% (up 39 bps), respectively. The rupee ended at 51.71 against the dollar, higher than its previous close 51.76.
There was devolvement in all three bonds sold on Friday ��� ones expiring in 2019 (cut off at 6.50%), 2027 (at 7.75%) and 2039 (at 7.90%). The devlovement was seen as a positive. Dealers felt that RBI rejected bids for high yields because it did not expect long-term interest rates to rise beyond a level. ���However, traders, who were allotted bonds as a part of the auction, quickly dumped them in the secondary market, pushing up the yields,��� said an official at IDBI Gilts. As per the calendar of auctions, RBI is to sell securities worth Rs 12,000 crore next week. ���Going by its purchases in the open market and operations and minuscule purchases in the secondary market, it is evident that RBI is not using its full ammunition to stabilise the market,��� says Ashish Vaidya, head of interest rate trading at HDFC Bank. ���The mood is not good,��� he added.
The rupee strengthened as gains in other Asian currencies against the dollar boosted sentiment and rising stocks aided. The dollar slipped against a basket of major currencies on Friday, as investors braced for data which is expected to show US job losses accelerated last month. Liquidity was good with call money available at a weighted average of 3.58%, in line with the reduced reverse repo rate, as per CCIL.
RBI has announced an Open market operation auction to purchase government bonds worth Rs 7,000 crore with a green-shoe option to purchase up to 50% of the notified amount through a price-based auction using the uniform price method on March 12. The settlement would be on March 13.
There was devolvement in all three bonds sold on Friday ��� ones expiring in 2019 (cut off at 6.50%), 2027 (at 7.75%) and 2039 (at 7.90%). The devlovement was seen as a positive. Dealers felt that RBI rejected bids for high yields because it did not expect long-term interest rates to rise beyond a level. ���However, traders, who were allotted bonds as a part of the auction, quickly dumped them in the secondary market, pushing up the yields,��� said an official at IDBI Gilts. As per the calendar of auctions, RBI is to sell securities worth Rs 12,000 crore next week. ���Going by its purchases in the open market and operations and minuscule purchases in the secondary market, it is evident that RBI is not using its full ammunition to stabilise the market,��� says Ashish Vaidya, head of interest rate trading at HDFC Bank. ���The mood is not good,��� he added.
The rupee strengthened as gains in other Asian currencies against the dollar boosted sentiment and rising stocks aided. The dollar slipped against a basket of major currencies on Friday, as investors braced for data which is expected to show US job losses accelerated last month. Liquidity was good with call money available at a weighted average of 3.58%, in line with the reduced reverse repo rate, as per CCIL.
RBI has announced an Open market operation auction to purchase government bonds worth Rs 7,000 crore with a green-shoe option to purchase up to 50% of the notified amount through a price-based auction using the uniform price method on March 12. The settlement would be on March 13.
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