Bonds fall for second week, OMO hopes surface

Written by Reuters | Mumbai | Updated: Sep 29 2013, 02:01am hrs
The government bonds fell for second straight week as large auctions, concerns over tight cash conditions and the prospect of further policy rate hikes weighed on sentiment.

However, RBIs assurance that it would maintain adequate liquidity triggered expectations of OMOs, which continued to provide some support on Friday.

The benchmark 10-year bond yield was down one basis point (bp) at 8.71% on the day, rising 13 bps on the week. Bullish cut-offs at the R14,000 crore ($2.2 billion) auction helped bonds to recover some losses. The cut-off yield on 8.28% 2027 bonds was 9.1852%, below a Reuters poll forecast of 9.2293%. In the overnight indexed swap market, the benchmark five-year rate closed 1 bp higher at 8.36% and the one-year rate ended 4 bps down at 8.72%.