The Hindu Business Line : Rupee declines; gilts range-bound

"It seemed like the PSU banks were buying dollars on behalf of the central bank. This is a good time for the RBI to buy dollars and infuse liquidity in the system as well as to replenish forex reserves post the redemption of IMD," said a dealer at a private bank.

In the forward market, the six-month premium ended at 1.90 per cent and the 12-month ended at 1.52 per cent.

Bonds were range-bound and inched up 5 paise towards close. The easing of liquidity and the news that the Government has reduced the interest rate on postal savings were seen as positives. But the auction of Rs 5,000 crore scheduled this week was seen as a negative because the market has no appetite for this kind of money, said a dealer with a private bank. The market is also confused between the conflicting signals from the RBI and the Finance Ministry.

"While the RBI is making money costlier by increasing interest rates, the Finance Minister is saying that the rate hike can be reversed. So the signals are confusing," said the chief bond dealer with a private bank.

The 7.30 per cent 29-year 2035 paper opened at Rs 97.7 (7.60 per cent YTM) and closed at Rs 97.76 (7.59 per cent YTM). The 8.07 per cent 11-year 2017 paper opened at Rs 105.4 (7.34 per cent YTM) and closed at Rs 105.38 (7.34 per cent YTM).

Call rates were between 6.9 per cent and 7.5 per cent with most deals being done between 7-7.1 per cent. In the first one-day auction, the RBI received no bids in the reverse repo and 33 bids for Rs 13,510 crore in the repo. In the second auction, the RBI received and accepted one-day bid for Rs 385 crore in reverse repo and 18 bids for Rs 4,865 crore in the repo auction. In the CBLO market, there were 318 trades for Rs 21,104.7 crore in the 6.49-6.75 per cent.