The bond yields ended steady on Monday, giving up early gains on caution before fresh supplies of bonds and bills totaling $2.8 billion hit the market this week. The yield on the 10-year bond ended at 7.98%, level with Friday?s close. Last week, the yield hit 8%, its highest in more than a month, as the Reserve Bank of India took steps to absorb surplus cash from the banking system.
Dealers said yields eased to 7.94% in early deals as some banks had to buy debt as they were close to the minimum requirement of holding bonds equal to 25% of their deposits.
?Basically, traders were wary of more supplies and so they pared positions,” a dealer with a foreign bank said.
Last week, the issue limit for market stabilization scheme bonds, which are used to absorb funds generated by the RBI’s currency intervention, was raised by more than one-third (Rs 40,000 crore) to Rs 15,0000 crore.
RBI is scheduled to sell Rs 4,000 crore of treasury bills on Tuesday and auction Rs 4,000 crore of market stabilisation scheme bonds on Thursday. Eight Indian states will sell 10-year loans worth Rs 33,34 crore on Thursday.
The inter-bank call rates remained range bound within 6.10-6.30% band. RBI received bids totaling Rs 25325 crore through reverse repo auction under its liquidity adjustment facility from the banking system, reflecting comfortable cash conditions.
The rupee unwound most of its gains on Monday on heavy dollar buying by foreign funds and oil refiners and a lack of supplies from exporters, traders said. It ended at 40.625/635 per dollar, weaker than the day?s high of 40.53 but a tad above Friday?s close of 40.635/645, which was its weakest close in over a month.
?Exporters expect the rupee to weaken further. There were few sellers of the dollar above the 40.60 level,? a foreign bank trader said. Data on Monday showed that RBI bought $3.19 billion in intervention in June, taking its dollar purchases to $26.7 billion so far in 2007, and traders expect further intervention on any rupee strength to help maintain export competitiveness. Traders said there was dollar buying from oil refiners throughout the day.