Bond yields edge down, Re falls

Written by Agencies | Mumbai | Updated: Aug 27 2009, 03:39am hrs
Bond yields edged away from their 2009 highs on Tuesday as some investors saw value after a sharp move up in recent days, but supply concerns are expected to prevent any sharp fall in the near term.

The 10-year benchmark bond, 6.90% maturing 2019 bond yield ended at 7.30%, below Mondays close of 7.34%. It had risen to 7.38% on Monday, its highest since Noember 20.

The 10-year yield is still up 12 basis points since Thursdays close, with most of the move coming on bond auction results on Friday that showed a diminishing appetite for debt.

The rupee resumed lower at 48.82/84 a dollar from its last close of 48.61/62 per dollar.

Forex dealers attributed initial sharp fall in the rupee to weakness in equity markets in early trade and sustained month-end dollar demand from importers, mainly oil refiners, to meet their import requirement.

According to analysts, the rupee is expected to remain under pressure in anticipation of dollar demand by oil refiners for their monthly import payments.

Volumes were a high at Rs 5,195 crore on the central banks trading platform.

Value buying is seen but the supply is huge, said Vineet Malik, head of interest rates at HSBC India.

The market is waiting to see if the central bank is buying in the secondary market, but there has been no indication so far.

The central bank sold Rs 4,900 crore of state loans on Tuesday, retaining an additional subscription of Rs 400 crore received at the auction. The cut-off yields were in line with market expectations.

Dealers said the demand at the state loan auction was primarily from pension funds, who like high-yielding securities to put in their hold-to-maturity portfolio where they are free from mark-to-market risks.

The central bank will auction Rs 6,000 crore of treasury bills on Wednesday and Rs 12,000 crore of bonds on Friday.

The benchmark five-year interest rate swap ended at 6.44/48%, from a previous close of 6.46/50%.