The Hindu Business Line : Bonds shed gains; call rates spurt

MUMBAI: Bond prices improved by nearly 20 paise in the early sessions on Tuesday - sentiment picked up with oil prices sliding below $50 per barrel - before they ended almost flat, dealers said.

Liquidity fears brought the market down later as it closed more or less at previous closing levels.

Sale of State development loan closed with respect to seven States today, but market players continue to be jittery as 18 States are yet to collect the target amount.

With another auction scheduled for announcement till November 8, issues relating to availability of funds continue to weigh heavily on the market, according to bond dealers.

The actively traded 11-year benchmark, 7.38 per cent 2015 paper rose to a high of Rs 103.40 before closing lower at Rs 103.20 at a yield of 6.95 per cent.

The 10-year benchmark ended at a yield of 6.94 per cent while the 6.65 per cent 2009 paper closed at Rs 101.05.

Call rates shot up as banks borrowed heavily for meeting CRR requirements. The rates went up as high as 5.20 per cent and traded within a range of 4.80-5.15 per cent through the day. In the one-day reverse repo auction 13 bids worth Rs 1,675 crore were received and accepted by the RBI.

The CBLO market also clocked its highest volume ever, with 165 trades worth Rs 6,317.20 crore being transacted. The rate range was closely following the call market being within the 4.95-5.15 per cent range.

The rupee closed eight paise weaker for the second consecutive session, ending at 45.5050/5150 against the dollar after an early morning high was struck at 45.36.

Heavy corporate demand drove the rupee down through the day, as oil companies and certain diamond merchants bought dollars, with banks also stepping in to cover short dollar positions. Although a brief spout of greenback selling was observed during early trading hours, it failed to sustain.

The forex market is awaiting the outcome of the closely fought US Presidential election as the fate of the US currency and consequently, other major currencies, hinges on it, said a trader at a private sector bank.

Annualised forward premia following the sharp rupee movement shot up as exporters were seen covering positions. The six-month premia closed at 2.80 per cent higher than the previous close of 2.60 per cent. The one-year premium ended higher at 2.30 per cent from early morning deals at 2.10 per cent. It had previously finished at 2.14 per cent.