The Hindu Business Line : Bond prices fall sharply

Bond prices fell sharply following the announcement of the government's additional borrowing programme of Rs 50,000 crore. According to a bond dealer with a private bank, the fall of over Rs 5 in prices was more of a knee-jerk reaction as the amount announced was more than expected. "An additional amount of Rs 25,000 crore was expected,'' he said.

The RBI on Tuesday announced the auction calendar for the period between January 5 and February 20. This is over and above the original scheduled borrowing programme of the government. Following this announcement the bond market opened lower. Further selling by banks to cut losses pulled down prices even more, during the day, said the dealer. Total traded volumes on the order matching system were lower at Rs 10,705 crore (Rs 15,860 crore).

The 2018 benchmark security opened at Rs 119 (5.59 per cent YTM) and closed at Rs 116.75 (5.87 per cent YTM), against the previous close of Rs 121.3 (5.30 per cent YTM. It touched a low of Rs 115.15 (6.09 per cent YTM) during the day. The 7.95 per cent 23-year 2032 paper opened at Rs 116 (6.60 per cent YTM) and closed at Rs 110.5 (7.03 per cent YTM) against the previous close of Rs 118.4 (6.42 per cent YTM. It touched a low of Rs 109.17 (7.14 per cent YTM) during the day.Yields are likely to ease and move lower from these levels as there is no indication that the Reserve Bank of India will increase interest rates, the dealer added. - Our Bureau

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