Bonds gain after central bank offers to buy securities

India’s 10-year bonds gained after the Reserve Bank of India (RBI) said it will offer to buy back existing debt at an auction tomorrow.

The RBI said on Tuesday it will purchase as much as Rs 6,000 crore ($1.3 billion) of securities as it helps the government to raise a record Rs 4.51 lakh crore this fiscal year ending March 31. The federal government may borrow between Rs 8,000 crore to Rs 10,000 crore a week next quarter, media reports said citing Finance Minister Pranab Mukherjee.

The yield on the most-traded 6.90 per cent note due July 2019 dropped four basis points to 7.09 per cent at the 5.30 pm close in Mumbai, according to the central bank’s trading system. The price climbed 0.25, or 25 paise per-100 rupee face amount, to 98.66. A basis point is 0.01 percentage point.

The Reserve Bank bought Rs 45.25 lakh crore of existing debt in open-market operations on September 17, compared with Rs 4,300 crore on September 10.

The government will complete its borrowing programme for the fiscal year by the end of January said Mukherjee in Kolkata. The cost of five-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, slipped. The rate, a fixed payment made to receive floating rates, decreased to 6.61 per cent from 6.64 per cent Tuesday.

Re weakens, snapping 5-day gain, as importers buy dollar
Rupee weakened, snapping a five-day advance, on speculation local importers increased purchases of foreign currency to settle month-end bills.

The local currency dropped from a six-week high as the nation’s refiners including Indian Oil Corp may have stepped up dollar buying to pay for costlier crude oil imports. Oil prices in New York have risen 60 per cent this year.

The rupee also fell as the Bombay Stock Exchange’s Sensitive Index slid 1 per cent, its first loss in six days.

The Indian currency slipped 0.1 per cent to 48.005 a dollar at the 5 pm close in Mumbai,. It earlier reached 47.865, the strongest level since August 10.

Offshore contracts indicate bets the rupee will trade at 48.02 a dollar in a month, compared with expectations of 48.03 Tuesday. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non- deliverable contracts are settled in dollars rather than the local currency.