The Hindu Business Line : Rupee holds steady; bond prices crash

The domestic currency has held at the 45.25 level over the past few days on the back of constant intervention by the central bank, according to currency dealers.

On Wednesday, it opened at 45.24/25 and touched an intra-day low of 45.27. In the forwards market, the forward premia moved up by about 10 basis points. The six-month premium closed at 0.54 per cent (0.45 per cent) and the one-year premium ended the day at 0.61 per cent (0.51 per cent).

Bond prices were seen crashing by 30-80 paise on Wednesday with mutual funds and traders turning sellers. The news about the market stabilisation bonds triggered the fall, said dealers.

The 8.07 per cent 2017 paper opened at Rs 122.66, went to a low of Rs 122.20 and closed at Rs 122.40. The 10-year benchmark closed at Rs 116.32 at a corresponding yield of 5.28 per cent after opening the day at Rs 116.63.

There were reports that the RBI would convene meetings regarding the issuance of market stabilisation bonds in February. This went against previous expectations that these liquidity suction bonds would hit the market only in the coming financial year.

There was surplus liquidity with call rates staying at 4.25-4.5 per cent range. Funds worth Rs 37,440 crore were accepted at the repo rate of 4.5 per cent by the central bank.