10-year bonds gain, Re rises

Written by Agencies | Mumbai | Updated: Oct 31 2009, 04:47am hrs
10-year bonds on Thursday gained for a fourth day, the longest stretch in a month, on speculation a decline in oil prices will help curb inflation and preserve the fixed payments on debt.

Demand for bonds may also rise as government debt sales taper off, said Srinivasa Raghavan at IDBI Gilts Ltd.

The drop in oil prices, the central banks stance and easing of supply pressure is having a positive impact on sentiment, said Raghavan, head of treasury at IDBI Gilts. Bond yields should decline further.

The yield on the 6.9% note due July 2019 was little changed at 7.27% at the close.

Meanwhile, rupee bounced back from near one-month lows, halting its slide seen this week, helped by dollar sales by exporters taking profits.

It closed at 47.21/22 per dollar, off a low of 47.6250 seen in early deals which was down 2.4% on the week, and 0.3% stronger than its previous close of 47.34/35.

The rupee came under pressure earlier on the day owing to the customary month-end dollar demand from refiners.

The rupee weakness is in line with the correction seen in the stock market, but there was heavy dollar selling by exporters as well, which pulled up the rupee from its lows, said Sudarshana Bhat, chief currency dealer at Corporation Bank.

RBI governor Subbarao on Tuesday held the repurchase rate at a record-low 4.75%. He raised the statutory liquidity ratio to 25% from 24%. Cash rates ended flat as surplus funds in the system continued to support banks' borrowing, and dealers said.

The one-day cash rate closed at 3.25/30%, unmoved from its previous closing. Banks parked Rs 96,330 crore with the central bank at its reverse repo facility on Thursday.

Shares continued its losing streak for the fourth consecutive day and closed 1.4% lower in volatile trade, its lowest close in nearly 8 weeks.