MUMBAI: Bonds continue to trade lower as RBI's cutting interest rates and following it up by buy back of bonds the next day has had little
positive effect on the bond market. Yields have risen rather dramatically, while the rupee is stronger. RBI is to sell bonds worth Rs 12,000 crores in an auction scheduled later in the day.
Both the yield on the old 10-year benchmark 8.24% paper maturing in 2018 and, the new benchmark 6.05% paper expiring in 2019 rose dramatically on Friday afternoon at 6.54 %( up 12 bps) and 6.28% (up 19 bps) respectively. The rupee was trading at at 51.57 against the dollar, higher than its previous close 51.76. Prices are for 3 pm
"Going by its purchases in the open market operations and miniscule purchases in the secondary market, it is evident that RBI is not using its full ammunition to stabilise the market," says Ashish Vaidya, head of interest rate trading at HDFC Bank. "All those people who missed out in the buy back are under real pressure. The mood is not good."
The rupee strengthened as gains in other Asian currencies against the dollar boosted sentiment and the marginally rising stocks aided the rise. The dollar slipped against a basket of major currencies on Friday as investors braced for data which is expected to show US job losses accelerated last month. BSE sensex was trading 1.6% higher at 8318 at 3 pm.
Liquidity was good with call money available at a weighted average of 3.58%, in line with the reduced reverse repo rate at 3 pm, as per CCIL.
