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MUMBAI: Bond prices rallied by around one rupee across maturities on Monday, with yields softening on account of the surplus rupee liquidity in the system.

The benchmark 10-year paper, the 7.38 per cent 2015 paper closed at Rs 106.40 (6.53 per cent yield to maturity) against its earlier closing at Rs 105.30 (6.67 per cent YTM) on Saturday.

The 9.39 per cent 2011 paper closed at Rs 115.35 (6.45 per cent YTM) against its previous closing at Rs 114.05 (6.69 per cent YTM).

Dealers said they were in a position to partially erase Friday's losses when bond prices plunged by around Rs 2 across maturities, as a knee-jerk reaction to the announcement of an auction to be held on Tuesday.

Call rates were easy between 4.75 per cent and 4.80 per cent levels in the inter-bank market.

In the one-day reverse repo under LAF, RBI received and accepted 42 bids amounting to Rs 32,745 crore at the rate of 4.75 per cent.

In the CBLO market, 139 trades were conducted clocking volumes of Rs 4,160.85 crore in the rate range of 2 per cent to 5.80 per cent.

The domestic currency ended at 43.48/49 per dollar on Monday, almost unchanged from its previous closing levels on Saturday, at 43.47/48.

The rupee opened the day at 43.58/60 and got dealt to an intra-day low of 43.66, before coming down to settle at its closing levels.

Dealers said the rupee was gaining value against the greenback, despite the dollar's rise against the euro and sterling Pound.

"The rupee has been aided in its appreciation by way of substantial dollar inflows on account of the increasing interest of foreign funds in Indian equities," said a dealer with a private sector bank.

In the near term, the rupee is expected to appreciate to 43.35.

In the forwards market, the six-month premium ended at 1.69 per cent (1.72 per cent) and the one-year premium ended at 1.30 per cent (1.31 per cent).

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Bonds recoup losses; rupee holds steady

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