Bond yields fell on Thursday after the government set a smaller-than-expected borrowing plan for the rest of the first half of 2009/10 that traders said eased concerns about heavy supplies.
The yield on the most traded 6.90%, 2019 bond ended at 6.79% from Wednesday?s close of 6.85%. Volumes were a high Rs 12,000 crore on the central bank?s trading platform.
Including an auction announced for Friday, the government has sold Rs 1.89 trn of bonds since 2009/10 started in April, and it will borrow a further Rs 1.1 trn by the end of September.
The rupee closed at 48.68/69 per dollar, from its previous close of 48.64/65. The Indian rupee wiped off early gains in tandem with the stock market, while demand for the U.S. unit from importers also weighed on the local unit. ?The market would be feeling comfortable with whatever has been done and it should rally,? said Srinivasa Raghavan, treasury head, IDBI Gilts.
Dealers said the market was expecting weekly auction sizes to be as high as Rs 15,000 crore, so the lower supplies were a big positive.
Overnight indexed five-year swap rates edged down to 6.14/6.19% from Wednesday?s close of 6.16/6.22%. The spread between 1- and 10-year government bonds remained at record highs of more than 300 basis points. The revised plan means the government will have gross market borrowing of Rs 2.99 trn in the first half of the fiscal year, about two-thirds of the record full-year target of Rs 4.51 trillion.