The Hindu Business Line : Bond prices plunge

Most market participants were taken by complete surprise and began to sell off to curb losses. “The inflation figures may have been leaked as bonds shed around 35 paise before the announcement,” said a bond dealer.

Domestic inflation was at of 6.68 per cent for the week-ended March 15, against 5.92 per cent in the previous week.

“Inflation at 6.68 per cent has left the markets a little jittery. Interest rate action from the monetary point of view now seems to be a given,” said Mr Ajay Mahajan, Group President, Financial Markets, Institutions and Investment Management, YES Bank. He expects the 10 year-yield to touch 8.05 per cent in the short term. Auctions worth over Rs 30,000 crore in the next two months have also dampened sentiment in the bond market and traders expect this bearishness to continue.

The 7.99 per cent-9 year-2017 paper opened at Rs 101.35 (7.80 per cent YTM) and ended at Rs 100.52 (7.91 per cent YTM), against the previous close at Rs 101.38 (7.77 per cent YTM). The 8.33 per cent-28 year-2036 paper opened at Rs 100.64 (8.27 per cent YTM) and ended at Rs 99.45 (8.38 per cent YTM), against the previous close at Rs 100.41 (8.29 per cent YTM).

— Our Bureau

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