Bond yields ease

The yields on government bonds fell on Thursday as weak industrial production data raised hopes of growth-supportive action from the Reserve Bank of India in the coming monetary policy review. The 10-year benchmark security closed at 8.1 per cent as compared to the close of 8.15 per cent yesterday.

In the data released on Thursday, the growth in industrial production for April was revised downwards to a negative 0.9 per cent from the provisional estimate of 0.1 per cent. However, May industrial output grew 2.4 per cent, higher than market expectations of one to two per cent.

“Industrial production picked up on an improved sequential momentum and last year’s low base. However, growth remains moderate and will remain constrained, but high inflation and the structural nature of the slowdown limits the scope for RBI to move,” said Leif Eskesen and Prithviraj Srinivas, economists at Hongkong and Shanghai Banking Corporation.

The central bank is scheduled to announce the first-quarter review of monetary policy on July 31. After reducing rates by 50bps in the annual monetary policy statement in April, it had kept these unchanged in June’s mid-quarter review.

Overnight indexed swaps (OIS) also witnessed easing after release of the industrial production data. The rates fell 10-15 bps across maturities, as compared to the previous day’s close.

The liquidity deficit continued to stay within the central bank’s comfort zone of one per cent of net demand and time liabilities since the start of the new fortnight ending June 13. on Thursday, banks borrowed Rs 46,665 crore from RBI’s repo window, while they deposited Rs 15 crore at the reserve repo window under the Liquidity Adjustment Facility.

Rupee falls on global dollar rally
The rupee fell by 29 paise to end at 55.93 per dollar, following overnight strengthening of the greenback as investors made a rush for liquid assets. The news of rate cuts by South Korea and Brazil fuelled concerns on global economic slowdown. The dollar index measured against six major global currencies was at a two-year high of 83.72 on Thursday, as compared with 83.57 a day before. The euro slipped from 1.22 to 1.21 on Thursday.

Call rates ends higher
PTI reports call money rates ended higher at the overnight call money market here on Thursday on renewed demand from borrowing banks. It closed higher at 8.15 per cent.