The Hindu Business Line : Rupee firms up; bond yields rise

Appreciation in the home currency was also on back of weakening of the US currency against other major currencies such as Euro, Yen and Pound Sterling.

"State owned banks bought dollars heavily in the foreign exchange market, perhaps at the behest of the central bank," said a dealer at a private sector bank.

Market participants are expecting a level of 44.80 very soon. The rupee might appreciate further if there is no intervention in the forex market, they said.

Annualised premia on forwards eased as the six-month d closed lower at 2.60 per cent (2.79 per cent), while the twelve-month premia ended at 2.09 per cent (2.21 per cent).

Bond yields eased off towards the end of the day before they rose to their highest in over two years on back of nervousness about higher than expected cut-off at the auction of dated securities by the RBI today.

Yield on the 11-year benchmark 7.38 per cent 2015 paper went as high as 7.34 per cent but settled lower at 7.29 per cent at a price of Rs 100.65. The ten-year benchmark also touched 7.32 per cent but eased off to 7.28 per cent after auction cut-off came near the market expectations.

Market participants said that full subscription received at the auction of Rs 8,000 crore government securities came as a surprise as a devolvement was expected. There was good interest from traders and investors as the five-year paper was available at a good level, said a trader at a private bank.

Call rates rose in the inter-bank market amid tight liquidity conditions as rates went up to 6.25 per cent, while on the lower end were near 5.75 per cent. In the one-day repo auction, the RBI injected Rs 3,705 crore of funds into the system through 15 bids, while accepted a sole bid worth Rs 40 crore in the one-day reverse repo auction.

In the CBLO market 158 transactions worth Rs 6,014.15 crore were conducted in the rate range of 5.70-6.20 per cent.