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Our Bureau

Mumbai, March 5

Bond prices edged down by 10 paise as traders were cautious about the new liquidity management system put in place by the central bank. Total traded volumes on the order matching system were Rs 1,740 crore (Rs 1,780 crore).

Market participants said the new system of limiting bank funds (Rs 3,000 crore) parked with RBI under the reverse repo facility was a prudent measure to manage liquidity. "The excess cash in the system is now flowing into the inter-bank call market and investment in Treasury Bills. Short-term rates have fallen by 25 basis points," said a dealer at a private bank. Market participants said the yields on one-year Treasury bills had fallen to 7.25 per cent from 7.5 per cent. The yields on three-month and one-month Certificate of Deposits have also seen a 25 basis point fall. Dealers said bond yields could harden as the auction of dated securities and advance tax outflows could strain liquidity.

The 7.37 per cent - 7 year-2014 paper opened at Rs 96.30 (8.06 per cent YTM) and closed at Rs 96.54 (8.01 per cent YTM), against Friday's Rs 96.67 (7.99 per cent YTM). The 8.07 per cent-10 year-2017 benchmark paper opened at Rs 100.50 (7.99 per cent YTM) and closed at Rs 100.83 (7.94 per cent YTM), against Friday's Rs 100.89 (7.93 per cent YTM).

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