The outlook for the bond market remains bearish, due to flaring global oil prices at record peaks of $62.40 a barrel that could stoke inflationary pressures, amid uncertainty on long-tenor rates, a treasury dealer said. The yield on the benchmark 7.38% 2015 stock ended flat at 6.98% with its price ruling at Rs 102.80/85, while the 7.37% 2014 bond remained almost constant at Rs 102.87/92.
In the overnight call market, rates on Wednesday surged to a peak of 6.05-6.10%, following a few mismatches in demand and supply, before finally closing the day firm at 5.30-5.50%. On Tuesday, call rates ended lower at 4.90-5.00%.
This being the reporting week, saw many investors rushing to cover their reserve requirements, which edged up call rates to the highs of 6.05-6.10%. After demands were met, call rates eased to 5.30-5.50% at the close, dealers said.
Most of the trades were done in the region of 5.25-5.75% and only stray deals struck above 6% after opening around 5.05-5.10%, they added.
The Reserve Bank of India (RBI) mopped up a massive Rs 50,610 crore at the one day fixed rate reverse repo auction on Wednesday at 5% from 55 bids, under the liquidity adjustment facility. The Indian currency staged a smart recovery on Wednesday, recouping its previous days loss aided by robust foreign capital inflows and the euros rise to a two-month peak against the dollar.
Traders said the RBI had also limited its strategic intervention in the forex market, after having pushed the rupee to a one-week closing low on Tuesday through sustained dollar purchases by state-run banks.
The rupee closed at 43.44/45 per dollar, up from Tuesdays close of 43.530/535. The resurgence of euro to a two month peak helped the rupees sentiment and gave the RBI a reason to stop intervening as well, said a dealer at a private bank.
Dealers expect the rupee to extend gains on Thursday if the euro continues to strenghten in the overseas market coupled with the flood of foreign fund investment pouring into the local equity market.
In the forward segment, the premia ended a tad higher despite the strong spot rupee. The benchmark six-month prmium finshed at 1.03 % as against the previous close of 0.90%.