Yields fall on rate cut hopes

Mumbai | Updated: Dec 30 2008, 06:30am hrs
Bond yields ended lower on Monday on expectations the central bank would cut interest rates further to bolster a slowing economy. The benchmark 10-year bond yield closed at 5.55%, a shade above an intraday low of 5.54% but below Friday's close of 5.61%.

Meanwhile, the rupee recouped all losses against the dollar to end slightly up because banks sold the greenback noting the intraday reversal in local shares amid thin volumes, dealers said.Dollar sales from exporters also aided the rupee's rise, dealers said.

It ended at 48.42 per $1 compared with 48.44 on Friday. It had hit an intra-day low of 48.85.

"The rupee closely followed stock markets on Monday. Exporters also sold dollars but in smaller lots," said a dealer with a state-owned bank.

The yield hit a 4- year low of 5.40% this month and has fallen 152 bps so far in December.

Volumes were high at Rs 12,375 crore on the central bank's trading platform.

"There is a strong resistance for the 10-year bond yield at 5.50-5.55% levels and the yield is unlikely to fall below this unless the central bank cuts rates," said Baljinder Singh, a trader at state-run Andhra Bank.