The Hindu Business Line : Bond market witnesses meltdown

Mumbai April 3 After the stock market crash, came the meltdown in the bond market. Prices in the debt market, which opened for the first time after the RBI move on Friday last week, tumbled by over a rupee.

The 8.07 per cent-10 year-2017 paper touched an intra-day low of Rs 99 (8.22 per cent YTM) and closed at Rs 99.31 (8.17 per cent YTM), against Friday's close at Rs 100.42 (8 per cent YTM).

Call rates closed at 10-12 per cent against the previous close at 40-50 per cent and banks borrowed around Rs 20,000 crore from RBI through the repo window at 7.75 per cent in the first auction.

"RBI's surprise hike has scared traders and the immediate tendency was to sell off. The outlook remains bearish and the 10-year yield could touch 8.30 per cent-8.40 per cent in the next three months," said Mr Ajay Mahajan, President, Financial Markets and Institutions, Yes Bank. "The pressure on liquidity may cause call rates to remain reasonably tight at 9-10 per cent," he added.

Riding on the cash crunch, the rupee gained by about 40 paise to 43.07 against the dollar as banks sold dollars. The rupee opened at 43.28/30, touched an intra-day high of 43.03/04 and closed at 43.07, against Friday's 43.47. The six-month forward premia closed higher at 5.93 per cent (4.4 per cent) and the one-year closed at 4.56 per cent (3.67 per cent).

The stock markets ended higher on the back of fresh buying in index heavyweights, particularly IT stocks. The BSE 30 Sensex closed at 12,624.58 points, up 169.21 points or 1.36 per cent. NSE S&P CNX index gained 1.57 per cent to end at 3,690.65 points.

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