Gilts Rebound On Jalanspeak

Yields of the corporate as well as government bonds rose sharply reacting to Standard & Poor's (S&P) downgrading of India's local currency but recovered after the Reserve Bank of India (RBI) governor Bimal Jalan said the bias towards softening of interest rates continues.

Jalan, talking to a news agency, also declined to revise gross domestic product (GDP) growth forecast of 6.0-6.5 percent for the current financial year 2001-02.

Bond prices opened low at yesterday's level but went up subsequently. Yields of triple-A (AAA) rated bonds went up by 8-10 basis points yesterday, but fell by 3-5 basis points after Jalan's statement.

Yields of three-year non-convertible debentures in creased to 9.09 per cent from 9.01 per cent yesterday, but came back to 9.05 per cent in today's trading.

The 10-year government paper yield fell by six basis points to 9.36 per cent, but recovered to 9.32 per cent at the end of today's trading.

The treasury head of a private sector bank said, "S&P has not said anything new about the Indian economy and all the aspects have factored into the money market already. The fall in the yields was only on the sentimental ground."

S&P's downgrading was based on unchecked deficits and indebtedness of the central government.

Dealers said the market was already concerned about that but as there is enough liquidity to support a larger borrowing programme, the yields remained in the soft even then.

Dealers said that recovery in the government paper yields could be even more but for the Rs 6,000 crore of twin auction held today.

Said a senior dealer: "Many of the participants were out of action today as they were waiting for the auction. After the auction as they will come back to the market the yields will come down more."