The Hindu Business Line : Rupee sheds gains; bond prices fall

MUMBAI: Heavy corporate demand saw the rupee shedding some gains on Monday as it closed weaker by around 5 paise at 45.42/43 against the dollar. The domestic currency had ended at 45.37/38 per dollar in the previous closing session on Friday.

Early morning trade saw some corporates selling greenbacks, which led the rupee to appreciate to 45.31. However, it started weakening from these levels, on a good amount of export cancellations and profit booking by corporates. The rupee opened stronger at 45.33 due to the dollar's weakness overseas.

Annualised premia on forwards inched up as importers rushed to cover positions even as export cancellations were taking place.

The six-month premia ended higher by 27 basis points to end at 2.60 per cent, while the one-year premia surged higher to 2.14 per cent (1.95 per cent).

Lack of buying interest in a thin volume market led bond prices to slide lower after it had opened about 30 paise higher.

Price freeze on oil prices in addition to expectation of a slash in the EPF rate led bond prices to rise in the morning from where they slid downward.

The popular 11-year benchmark 7.38 per cent 2015 paper opened at Rs 103.75 about 30 paise higher than previous close, before it fell to end at Rs 103.20 at a yield of 6.95 per cent. The 10 year benchmark 7.37 per cent 2014 ended at Rs 102.90 while actively traded 6.65 per cent 2009 paper closed at Rs 101.01.

Market participants expect tightness in liquidity ahead of the `On Tap Sale' of state development loan and another auction due in the first week of November. These auctions will drain nearly Rs 14,000 crore from the market and result in pressure on yields, dealers said.

Call rates in the inter-bank market exhibited tightness as deals were struck at 5.00 per cent levels, with the range being 4.75-4.90 per cent. 1-day reverse repo auction saw merely Rs 3,010 crore of fund inflow through 13 bids, showing lack of surplus funds.

In the CBLO market 131 trades worth Rs 4,779.85 crore were transacted in the rate range of 4.75-5.00 per cent.