Bond sale leads to rise in yields

MONEY MARKET ROUND-UP

The rupee continued its downward movement for a second day, even as the 10-year bonds fell the most in a week.

Bonds: Auction blues
The 10-year bonds fell, pushing yields to the highest this month, after the government said it will hold an unscheduled debt sale this week. Benchmark notes dropped the most in a week after the government said late yesterday it plans to sell Rs 10,000 crore ($2.2 billion) of bonds on September 26, advancing a part of its borrowing from the second half of the financial year that started on April 1. The additional borrowing is for meeting the “emerging requirements of the government”, the finance ministry said.

“Bonds have fallen in reaction to the announcement of unscheduled debt supply,” said Chidambaram Lakshmanan, a fixed-income trader at IndusInd Bank in Mumbai. “Yields could rise further in the coming days.”

The yield on the benchmark 8.24 per cent note due April 2018 rose 19 basis points to 8.63 per cent as of the 5:30 p.m. close in Mumbai, according to the central bank’s trading system. The price fell 1.18 per Rs 100 face amount, to 97.5. A basis point is 0.01 percentage point.

Rupee: Jittery
India’s rupee fell for a second day on speculation importers bought foreign currency to settle bills.

The currency declined to the lowest since September 18 as local refiners may have increased dollar purchases to pay for crude oil imports as the cost of the commodity rose. The nation imports almost three-quarters of the oil it uses.

“The dollar is available at a higher premium and that has made importers, particularly refiners, jittery,” said P V Rao, a currency trader at IndusInd Bank in Mumbai. “Refiners have stepped up dollar purchases as crude prices are not at levels where they can afford to keep open positions.”

The rupee dropped 0.5 per cent to 45.955 per dollar as of the 5 p.m. close in Mumbai.