Gilts dip ahead of auctions

MONEY MARKET ROUND-UP

Government bond prices ended marginally down in choppy trade today as most banks cut their holdings ahead of the large outflows scheduled through auctions this week.

“The market was taken aback by the T-bills amount. It was a dampener. But the market had also rallied quite significantly last week, so I am going to address today’s movement as profit-booking,” said R V S Sridhar, vice-president, Axis Bank.

Prices moved in a 10-paise band for most part of the day. Week-on-week, the most-traded 8.24 per cent, 2018 bond has gone up 84 paise. The market had opened lower by about 20 paise, as prices fell in a knee-jerk reaction to increased amounts under T-bill auctions.

The Reserve Bank of India (RBI) will auction auction Rs 9,000 crore of T-Bills on Wednesday. On an average, RBI usually holds T-bill auctions for Rs 4,000-4,500 crore.

Among the other major outflows scheduled this week, RBI will auction Rs 8,000 crore of gilts on Friday, which include Rs 5,000 crore of 8.24 per cent, 2018 bond, and Rs 3,000 crore of 7.95 per cent, 2032 bond.

The most-traded 10-year bond 8.24 per cent, 2018 had risen 7 paise to touch an intraday high of Rs 98.45. But it settled at Rs 98.32 or 8.4967 per cent yield-to-maturity from Rs 98.38 or 8.4873 per cent.

Rupee: Gives up gains

The rupee erased all its gains against the US dollar today because of the latter’s rise against major currencies and also due to banks buying the greenback for oil companies, dealers said. The Indian unit ended at 44.61 to a dollar against 44.65 on Friday. Today, the rupee moved in a wide 53-paise range.

“The euro and the pound have weakened against the dollar, following which some banks bought the greenback,” said a dealer at a European bank. News of US regulators taking over Freddie Mac and Fannie Mae and announcing a bailout package for these two companies on Sunday, dented the sentiment for the dollar against its rivals.

The rupee opened nearly 40 paise up, noting the dollar’s weakness and rose to an intra-day high of 44.11. Expectations of foreign fund inflows also led to a selling. However, in the late Asian trade, the dollar showed signs of rebounding because traders assessed the impact of the news, crippling the rupee’s rise. A strong dollar demand from oil companies and importers also added to the buying.