Bonds up, Re falls

Written by Bloomberg | Updated: Oct 29 2009, 04:52am hrs
The bonds rose the most in more than a month after the RBI ordered local lenders to boost holdings of state debt following a policy meeting on Tuesday.

The RBI raised the statutory liquidity ratio to 25%. The move on the bond-holdings limit is a bit of a surprise and has immediately boosted demand from banks which dont meet the stipulation, said Murthy Nagarajan, a fund manager at Mirae Asset Global Investment in Mumbai. The yield on the 6.90% note due July 2019 fell seven basis points to 7.34% as of the close in Mumbai, the biggest drop since September 15, according to the central banks trading system. The price rose 0.47, or 47 paise per 100 rupee face amount, to 96.96. A basis point is 0.01 percentage point.

The rupee fell 0.6% to 46.92, tracking declines in Asian currencies. Increased purchases of state bonds by lenders will help prevent yields from rising as the government presses ahead with record debt sales to fund economic stimulus measures. India plans to raise a record Rs 4.51 lakh crore in the fiscal year through March to plug a budget deficit estimated at 6.8% GDP, the most since 1994.