The Hindu Business Line : Bonds volatile; rupee weakens

MUMBAI: The bond market witnessed volatility on Friday following the announcement of the auction of two government securities to raise Rs 7,000 core and a Rs 300-crore auction by the Kerala Government.

Inflation figures, which were higher than market expectations, was another reason for the fall in bond prices, dealers said.

According to a dealer with a private bank, the 7.38 per cent 10-year 2015 benchmark paper, closed at Rs 102.40 (7.05 per cent YTM) against Wednesday's close of Rs 102.82. It had opened at Rs 102.75 (6.99 YTM).

Another dealer said that the 10-year paper is likely to reach levels of 7.15 per cent before the auction and may even reach between 7.20 per cent and 7.25 per cent after the auction.

About the impact of the impending auctions, he said, "The auction of two dated papers is a bold step. If LIC is interested in the 2017 paper and is sitting on a pile of cash, it can save the market."

There was no trade in the 2015 paper post the announcement of the Kerala state bonds auction, dealers said.

The rupee ended weakagainst the US dollar, as the stock market crashed by 215 points, said forex dealers. All the major foreign currencies also weakened against the greenback. The rupee closed at 43.82/83 against the dollar, lower than Wednesday's close of Rs 43.75/7525.

The forward premia market rose by about 1.5 per cent, with the six-month premium closing at 1.82 per cent (1.78 per cent) and the 12-month premium at 1.55 per cent (1.47 per cent). The interbank call rate was almost unchanged at 4.80 per cent (4.75 per cent). In the one-day reverse repo under LAF, the RBI received and accepted 33 bids amounting to Rs 25,125 crore. The CBLO market saw 201 trades aggregating Rs 6,310.30 crore in the rate range of 4.40 per cent to 5.50 per cent.

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