Bond prices witness rally, recover losses

Sujoy Manna

Mumbai, June 6: BOND prices, mostly at the far-end witnessed a smart rally, thus recovering almost 50 per cent of the losses incurred following the Fitch rating.

The 11.60 per cent 2020 paper went up by around 80 paise, followed by 11.43 per cent 2015 and 11.50 per cent 2011 paper, both went up by 50 paise and 45 paise respectively.

The unexpected change in outlook by Fitch a few days back had broken the rally in the bond prices, which at the far-end went down by around Rs 1 to Rs 1.5.

The ten-year benchmark yield, which had touched a low of 9.75 per cent firmed up to 9.93 per cent, up almost 20 basis points from its lowest level, following the downgrade.

The market sentiment underwent a complete reversal and triggered a sharp unwinding of positions mostly at the far-end of the market.

The market on Wednesday opened on a positive note and bond prices went up by around 50-70 paise before the Reserve Bank of India (RBI) conducted its open market operation.

The RBI has put two securities, 11.5 per cent 2011 and 10.25 per cent 2021 on its sale window.

Analysts feel that although the economy looks bleak given the fiscal situation the proposed fiscal responsibility bill, which is likely to be tabled in the Parliament next June, is likely to take care of the fiscal situation.

The analysts further said that the fiscal performance of the government, which remained poor in the last year, as measured by the fiscal slippage is at Rs 2,397 crore. However, this slippage was substantially lower than
Rs 20,000 crore plus slippage witnessed in each of the previous two years.

The market players opined the liquidity position to be adequate through the month of June.

The outflow on account of advance tax payments and fresh issuance in the month is to be taken care of by the outstanding refinance and repos.