The Hindu Business Line : Bond prices drop Rs 2.50

Bond prices fell by Rs 2.50, as the Reserve Bank of India set a higher than expected cut-off yield for the three auctioned government securities.The RBI set a cut off yield of 6.7 per cent for the 7.59 per cent-2016 paper, 7.35 per cent for the 6.30 per cent-2023 paper and 7.60 per cent for the 7.5 per cent-2034 paper. This was much higher than the market expectation of 6.58 per cent, 6.96 per cent and 7.43 per cent respectively, said a dealer with a private bank.

The two longer dated papers devolved on primary dealers as not much interest was shown in these papers, added the dealer. Lower inflation numbers failed to bring cheer to the markets, as they had discounted the inflation number. The market participants are worried that the supply of government securities will exceed the demand, said dealers.

Total traded volumes on the order matching system were higher at Rs 11,190 crore (Rs 10,705 crore). The benchmark security opened at Rs 116 (5.96 per cent YTM) and touched an intra-day high of 116.5 (5.90 YTM). It fell to touch an intra-day low of 113.85(6.24 per cent YTM). It closed at 114.25 (6.19 per cent YTM), against the previous close of Rs 116.75 (5.87 per cent YTM). The 7.95 per cent-2032 paper opened at Rs 109 (7.15 per cent YTM) and closed at Rs 107.5 (7.27 per cent YTM). —

Our Bureau

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