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Mumbai, Jan 4

Bond prices rose after the Finance Minister, Mr P. Chidambaram, said he would like both deposit and lending rates to come down by around 0.5 percentage points. The market has interpreted this as a signal to banks that they must reduce interest rates, said the chief bond dealer with a private bank. Total traded volumes in the order-matching system were much higher at Rs 12,635 crore (Rs 7,005 crore). Following the statement by the Finance Minister, the benchmark 7.99 per ce nt paper rallied by as much as 45 paise. It opened at Rs 101.50 (7.76 per cent YTM) and closed at Rs 101.93 (7.70 per cent YTM), against the previous close of Rs 101.55 (7.75 per cent YTM). The 8.33 per cent-28 year-2036 paper opened at Rs 102.5 (8.10 per cent YTM) and closed at Rs 102.95 (8.06 per cent YTM), against the previous close of Rs 102.5 (8.1 per cent YTM). Although liquidity has improved, there is also a fear among market participants that the RBI may announce MSS auctions, the dealer said.

— Our Bureau

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