The spot rupee ended higher at Rs 50.57 per USD as against its previous close of Rs 50.73.
The widely traded 6.05%, 2019 paper closed lower at Rs 93.19 as against its previous close of Rs 94.85.
Here is a verbatim transcript of Latha Venkatesh’s comments on CNBC-TV18. Also watch the accompanying video.
The huge borrowing programme announced by Ashok Chawla was not really a surprise because the fiscal deficit of the government was known – it is Rs 3.6 lakh crore of borrowing they will do and traditionally 66% is borrowed in the first half. So the fact that they will borrow Rs 2.4 lakh crore was not that way a shock but when the number got announced and the market realised that Rs 48,000 crore will be borrowed on each of the months – April, May and June – you saw bonds come crashing down. They were already weak because there is a Rs 12,000 crore bond auction later today afraid of that supply and there is no appetite for the fresh supply, bonds were already weak, this announcement brought them down even further.
There was a minor respite for bonds though. The RBI Governor Dr. Subbarao was speaking at a press conference and he said that the government borrowing programme will be conducted in a manner which is least disruptive to yields. The other thing that the market takes encouragement from is last time around when the yield on the 10-year bond went above this 7% mark RBI had actually cancelled that auction or rather had not taken any bids. So the hope is that this time around some dramatic action could be taken but this is the last auction in this financial year. It may not be very easy to cancel it nevertheless the market at the moment is not giving itself any room for nasty shocks – bonds have been beaten down to pulp and they are just waiting to see how the RBI might ameliorate the situation of continually rising yields – rising because bond prices are falling and bond prices are falling because there is no appetite for the huge government issuance that is lined up.
