The Hindu Business Line : Bond prices rally post-auction

Bond prices on Friday rallied after the Rs 9,000-crore auctions of two government papers, as the cut-off price set by the RBI exceeded market expectations. The market was in the positive territory for most of the day and saw a rally of 10-15 paise once the bidding started. By the end of trade, the net gain in prices across securities was about 20 paise, said dealers.

The two papers that were reissued today by the RBI were the 10-year 7.59 per cent and the 28-year, 7.5 per cent 2034 paper. The RBI set the cut off yield for the 10-year paper at 7.76 per cent and at 8.45 per cent for the 28-year paper. "It seems most of the investors had submitted aggressive bids for the papers.

Traders got very few allotments," said the chief bond dealer with a private bank. The 7.59 per cent 10-year 2016 paper opened at Rs 98.85 (7.76 per cent YTM) and closed at Rs 99.32 (7.69 per cent YTM) against the previous close of Rs 98.74 (7.78 per cent YTM).

The 7.5 per cent 28-year 2034 paper opened at Rs 90 (8.44 per cent YTM) and closed at Rs 90.60 (8.37 per cent YTM). "There could be some correction next week, as selling is likely at these levels. There was selling when yields on 10-year touched 7.76 levels," said a dealer with a private bank. The wholesale price inflation, which touched 5.01per cent, was as expected and hence discounted by the market, the dealer said.