The Hindu Business Line : Bond prices decline

Bond prices fell on Monday, which was the first day of trading, after RBI announced the hike in cash reserve ratio. Dealers were worried that liquidity would dry up as excess funds get absorbed. There were also increased expectations of a hike in the repo rate, in the monetary policy. The 7.99 paper fell by almost Re 1, as dealers were wary of taking positions.

A bond dealer with a private bank said, "While earlier people expected that RBI may not take any further action after hiking the CRR, now most people are expecting the repo rate to be hiked. So nobody is taking positions." Mr P. Mukherjee, President (Treasury), Axis Bank, said that bond prices had fallen only as a reaction to the hike in CRR. He said that a repo hike seemed unlikely and inflation, which is a major concern, would ease in the coming eeks. But one section of the market believes that inflation could cross 8 per cent soon.

Total volumes on the order matching system were Rs 2,160 crore (Rs 1,985 crore). The 7.99 per cent 2017 9-year paper opened at Rs 98.62 (8.20 per cent YTM) and closed at Rs 98.71 (8.19 per cent YTM); against the previous close of Rs 99.7 (8.12 per cent YTM). The 7.38 per cent 2015 7-year paper opened at Rs 95.5 (8.2 per cent YTM) and closed at Rs 95.8 (8.15 per cent YTM); against the previous close of Rs 95.95 (8.12 per cent). - Our Bureau

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