The Hindu Business Line : Bond prices crash by over a rupee

FEARS of a hardening in domestic interest rates coupled with a panic bout of profit booking by bond market participants led bond prices to crash by over Re 1 across maturities in the government securities market on Wednesday.

The yield on the 10-year benchmark ascended to a 16-month high of 6.11 per cent, a level last seen on March 31, 2003, according to debt market dealers. On Tuesday, the 10-year benchmark yield ruled at 5.94 per cent.

Bond prices plummeted on heavy selling across the board and stop-losses being triggered for almost all market participants, said the dealers.

The prices have crashed straight for the third trading session in a row.

The benchmark 10-year paper, the 7.37 per cent 2014, plunged by a rupee to end at Rs 109.10, with the 11-year benchmark falling steeply by 75-80 paise in one hour of trading, said the dealers.

The yield on the 10-year US paper rose by 13 basis points on Tuesday, fuelling concerns of foreign inflows to the country drying up, they added.

"A South India-based private bank made sales worth Rs 300 crore (on Wednesday), which triggered off selling from all quarters. Every sale sent the prices lower by 10 paise," said a source.

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