The Hindu Business Line : Bond prices lower on RBI move

Bond prices opened lower in the morning after the Reserve Bank of India allowed additional borrowing by banks, against their SLR securities, as it is tantamount to lower SLR. But prices moved up later on, as the additional liquidity coming into the market was seen as positive, said bond dealers. According to a bond dealer with a private bank, the move by RBI is a quasi SLR cut, as it allows banks to borrow more money without buying more Government securities. “The RB I move effectively means that banks can keep 24 per cent SLR instead of 25 per cent. RBI is perhaps getting banks prepared for lower SLR requirement,” he said. About Rs 33,000 crore additional liquidity will come into the market, which is 1 per cent of the net demand and time liabilities of banks, as permitted by RBI, in its notice yesterday. The fact that the US Federal Reserve did not cut interest rates as was widely expected, also impacted the market to some extent, the dealer said. Total traded volumes on the order matching system were at Rs 5,715 crore (Rs 7,360 crore). The 8.24 per cent-10 year-2018 paper opened at Rs 100.5 (8.16 per cent YTM) and closed at Rs 100.3 (8.19 per cent YTM), against the previous close of Rs 100.97 (8.09 per cent YTM). During day trade it touched a high of Rs 100.74 (8.12 per cent YTM). The 8.24 per cent-19 year-2027 paper opened at Rs 96.90 (8.58 per cent YTM) and closed at Rs 96.95 (8.57 per cent YTM). During the day it touched a high of Rs 97.6 (8.5 per cent YTM).

— Our Bureau

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