The Hindu Business Line : Bond prices up

Bond prices rose on Friday following statements by the Finance Minister, Mr P. Chidambaram, that moderate inflation may lead to moderate prices. Market participants interpreted this as an indication that the Reserve Bank of India may not change inflation targets in the monetary policy next week, said dealers.

Another reason for the rally in the bond market was the carry over effect of the statement by the US Federal Reserve Chairman on Thursday that there is likely to be a moderation in core inflation. The fact that the Rs 5,000-crore auction of Government securities scheduled for this week was postponed also helped bond prices gain, said a dealer with a private bank. Volumes in the bond market also improved and were about Rs 1,000-Rs 1,500 crore in the order matching segment. Prices opened with a gap of 15 paise on the higher side and then moved up, said a dealer with a private bank. Prices gained about 45-50 paise by end of trade. The 7.59 per cent 10-year 2106 benchmark opened at Rs 95.4 (8.29 per cent YTM) and closed at Rs 95.71 (8.24 per cent YTM), against the previous close of Rs 95.26 (8.31 per cent YTM). The 9.39 per cent-5 year-2011 paper opened at Rs 106.40 (7.8 per cent YTM) and closed at Rs 106.61 (7.75 per cent YTM) against the previous close of Rs 106.30 (7.83 per cent YTM). Prices are likely to remain around the same level with a small correction on Monday, next week, as it is the only trading day before the monetary policy, said the dealer.