The Hindu Business Line : Bond prices crash; rupee tad firmer

MUMBAI: Bond prices crashed by around one rupee across maturities on Thursday due to aggressive sell-offs in the Government securities market, triggered by statements made by the Finance Minister that the EPF rate may be maintained at 9.5 per cent.

However, the liquidity overhang in the system along with an expectation of a lower inflation rate announcement on Friday, helped recoup some of the losses, said dealers.

The 10 year bench-mark yield on the 7.37 per cent 2014 paper hardened to 6.27 per cent at Rs 107.90 as against Wednesday's level of Rs 108.60 - when the yield on this paper was at 6.18 per cent.

Earlier this week, prices had risen on expectations of a lower inflation rate. Call rates were in the range of 4.25 and 4.50 per cent in the inter-bank market.

Under the LAF, the RBI received and 13 bids amounting to Rs 1,975 crore at the rate of 4.50 per cent in the seven-day repo. In the one-day repo, 41 bids amounting to Rs 22,135 crore were received. In the CBLO market' 92 transactions worth Rs 3,652.55 crore were conducted.

The domestic currency ended at Rs 46.33/3350 in a lacklustre forex market, marginally stronger as compared to Wednesday's closing at Rs 46.35/37. The rupee opened at Rs 46.35/37 and touched an intra-day low of Rs 46.3850, at which point an aggressive bout of dollar selling by state-run banks propped up the rupee back to its closing levels.

Forwards eased marginally with the six month premium ending at 2.49 per cent (2.55 per cent) and the one year at 2.16 per cent (2.22 per cent).