Money & Banking

Bond market disappointed over buyback papers; yields rise

Our Bureau Mumbai | Updated on January 05, 2011

Bond prices fell by almost 40 paise as the market was disappointed by the choice of government securities that the RBI has offered to buyback.

. The market was anticipating that the RBI would buyback 8.08 per cent-2022 paper and had offloaded the stock over the last trading session. But of the four stocks that RBI announced, two are illiquid, and are unlikely to see good response, said a dealer with a private bank.

“Most of the banks are holding the four papers announced for the buyback in their investment books and may find it difficult to sell them,” he said.

Besides, the papers announced for auction to be held on January 7, were also a dampener, the dealer added.

“The auction of the 7.8 per cent-2020- also looks difficult in these sentiments as it already has an outstanding of Rs 56,000 crore,” he said.

The total traded volumes on the order matching system were to the tune of Rs 6,890 crore (Rs 2,995 crore).

The most highly-traded 8.08 per cent-12 year-2022 paper opened at Rs 99.9 (8.09 per cent YTM) and closed at Rs 99.68 (8.12 per cent YTM), against the previous close of Rs 100.07 (8.06 per cent YTM).

The second most highly traded paper 7.17 per cent-5-year-2015 opened at Rs 97.5 (7.84 per cent YTM) and closed at Rs 97.48 (7.85 per cent YTM).

The disappointment over the auction and buyback papers coupled with negative sentiments arising out of worries over inflation and rising oil prices could lead to a further inching up of the yield curve, the dealer said.

Published on January 05, 2011

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