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Our Bureau

Mumbai, May 28

Bond prices surged by around 40 paise as contrary to expectations, the RBI did not take any action to mop up excess liquidity. Total traded volumes on the order-matching system were around Rs 5,875 crore. Bond prices had been falling last week as market participants were expecting the RBI to hike the Cash Reserve Ratio or announce a Market Stabilisation Scheme auction (MSS), to absorb surplus liquidity. This is the second consecutive week that the RBI has not scheduled an MSS auction. "Since, there was no action from the RBI, bond prices rallied. It is surprising that the RBI has not acted even when there is excess cash in the system," said a dealer at a private bank. Traders said it was surprising, since the central bank has maintained the stance that liquidity management was a priority. The 8.07 per cent-10 year-2017 paper opened at Rs 100.05 (8.06 per cent YTM), touched an intra day high of Rs 100.25 (8.02 per cent YTM) and closed at Rs 100.03 (8.06 per cent YTM). The 7.38 per cent-8 year-2015 paper opened at Rs 95.85 (8.07 per cent YTM) and closed at Rs 95.75 (8.09 per cent YTM), against the previous close at Rs 95.40 (8.15 per cent YTM).

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