The Hindu Business Line : Bond prices rise as market turns upbeat

BOND prices rose for the third consecutive day due to the absence of negative factors. The prices of most Government stocks, including the less-traded 10-year benchmark, rose by an average of 30-70 paise on Wednesday.

Among the reasons that contributed to the fall in bond yields were the slip in US yields, oil prices cooling off and good liquidity in the system. The Rs 5,000-crore Government auction scheduled for Thursday was also a positive factor, dealers said.

According to Mr G. C. Satish Chandra, Head, Fixed Income, Centurion Bank, issues like the constraint on liquidity, the crude oil price rise and the pending petroleum and diesel price hike have all been resolved in the last 3-4 days.

The market is also expecting inflation to remain stable, as the fuel price hike has been accounted for. "Even if inflation rises by around 0.25 per cent, the market has already factored it in," Mr Chandra said.

Thursday's auction will most likely breeze through, as there is liquidity of around Rs 14,000 crore in the system. The market has also discounted the fact that there will be no auction for the next 10 days, which was another reason for the upbeat mood, Mr Chandra added.

On Wednesday, the bond market saw broad-based buying. The 7.55 five-year 2010 paper opened 25-30 paise higher at Rs 104.05 (6.58 per cent yield to maturity/YTM). It touched a high of Rs 104.16 (6.54 per cent YTM) and ended at Rs 104.10/14 (6.55 per cent YTM) against Tuesday's close of Rs 103.90.

The 7.38 10-year 2015 benchmark paper opened at Rs 104 (6.83 per cent YTM). It touched a high of Rs 104.10 (6.81 per cent YTM) and ended trade at Rs 104.05/10 (6.83 per cent) against the earlier close of 103.65/70 (6.87 per cent YTM).

The 8.07 12-year 2017 paper opened at Rs 109 (6.93 per cent YTM), about 30-35 paise higher than the pervious close. It touched a high of Rs 109.40 (6.88 per cent) and closed trade at Rs 109.03/31 (6.89 per cent) against Tuesday's level of Rs 108.76 (6.95 per cent YTM). The call rates were between 4.95 and 5 per cent.

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