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Mumbai, Oct 1: The government securities market turned bearish on Friday, with yields jumping by over 10 basis points while prices declining by almost 75 paise, over rising US treasury bond yields, concerns over inflation and intervening holidays.
Trading volume was thin at around Rs 2,000 crore, compared to Rs 3,500-4,000 crore on a normal trading day, as banks, especially from the public sector, preferred to adopt a wait-and-watch approach on the first trading day of the third quarter.
Yield on the benchmark 7.37% 2014 gilt ended the day at 6.37% against the previous close of 6.25%. Yield on the paper touched an intra-day high of 6.40%.
“Though the liquidity situation is okay, banks did not take fresh position in the market due to intervening holidays. Tomorrow is a bank holiday on account of Gandhi Jayanti, on next Tuesday and Wednesday trade unions have called for a strike,” said a dealer.
In tandem with the increase in yields on gilts, the five-year benchmark overnight interest rate swap also rose to 6.28% as against the previous close of 6.18%.
With the gross domestic product (GDP) growing by 7.4% in the first quarter of the current fiscal as against 5.3% in the corresponding period of the last year, market players feel that there will be good credit offtake in the remaining part of the financial year and this could exert pressure on interest rates.
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