The Hindu Business Line : Bond prices surge

Bond prices surged by over one rupee reacting to RBI’s stance of keeping key rates unchanged in the annual monetary Policy. Total traded volumes on the order matching system were at Rs 10,265 crore.

Dealers said that there was a sense of relief in the market since the widely held view was that the repo rate would be hiked by the RBI. “The monetary policy was expected to be hawkish. So, the CRR hike came as a relief for the market since it d oes not impact funding costs,” said a dealer at a private bank. Market participants expect the 10-year paper to be in the range of 7.85-8.15 per cent. However, traders also said that the uncertainty about price movements may continue. “The bond market will continue to track inflation. Despite the softening seen in some of the commodity prices, oil prices continue to bubble. The market will also keep a keen eye on the US Federal Open Market Committee meeting on Wednesday. The expectation is that the Fed may now hit the pause button on interest rates,” said Mr K. Harihar, Head, Treasury, Development Credit Bank. According to analysts, after factoring in the hikes in CRR, the system may continue to have a surplus of Rs 5,000 crore–Rs 15,000 crore liquidity on an average over the next quarter.

The 8.24 per cent- 10 year-2018 paper opened at Rs 100.77 (8.12 per cent YTM) and ended at Rs 102.04 (7.94 per cent YTM), against the previous close at Rs 100.70 (8.13 per cent YTM). The 7.38 per cent- 7 year-2015 paper opened at Rs 95.95 (8.12 per cent YTM) and ended at Rs 96.78 (7.96 per cent YTM), against the previous close at Rs 95.88 (8.13 per cent YTM).

— Our Bureau

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