The Hindu Business Line : Bonds up on possible auction delay

Bond prices inched up by around 15 paise on rumours of a possible postponement of the Rs 5,000-crore Government securities auction scheduled between July 17 and 25. Dealers said that they expected the auction to be held after the quarterly review of the credit policy. "The prices rose in anticipation of the auction being deferred or cancelled. The auction amount could also be reduced or a floating rate bond could be issued to hedge against interest rate risk," said a dealer at a private bank. The Primary Dealers Association of India met Dr Rakesh Mohan, Deputy Governor, RBI, on Wednesday, seeking a postponement of the auction. "Primary dealers have to underwrite at least 50 per cent of the issue and if RBI hikes interest rates in the quarterly review of the credit policy, then dealers will suffer more losses," said a market participant. The 7.59 per cent-10 year-2016 benchmark paper opened at Rs 94.9 (8.36 per cent YTM) and closed at Rs 95 (8.35 per cent YTM), up from Tuesday's Rs 94.87 (8.37 per cent YTM). The 9.39-5 year-2011 paper opened at Rs 106.15 (7.86 per cent YTM) and ended at Rs 106.15 (7.86 per cent YTM), higher than Tuesday's close at Rs 106.07 (7.88 per cent YTM).