Govt bonds wipe off gains as traders trim positions

Yield on 10-year benchmark paper ends at 8.77% compared with previous close of 8.73%

Government bonds wiped off the gains recorded during the day due to profit booking and selling pressure as the Street awaits the new 10-year bond to be auctioned soon. Earlier during the day yields fell sharply after Finance Minister Arun Jaitley said that the fiscal deficit will be 4.1 per cent of GDP for the current fiscal and by 2016-17 it shall be reduced to 3 per cent of GDP.

For 2014-15, the estimated gross and net market borrowings of the government increased only marginally compared with the expectation of the market. The Street had expected additional market borrowings of Rs 20,000 crore this fiscal. But the gains were short-lived as traders cut their positions.

“Now the worry for the market is that the new 10-year bond may come soon because of which traders are cutting their positions. Besides that there was profit booking after the Budget. Before the Budget these traders had taken position which they sold today and booked profits. These factors led to yields rising,” said Balginder Singh, a government bond dealer at Andhra Bank.

The yield on the 10-year benchmark bond ended at 8.77 per cent compared with previous of 8.73 per cent. During intra-day trades the yield had fallen to 8.64 per cent. A fall in yield indicates rise in bond prices and vice-versa. The total borrowings requirement for 2014-15 has been budgeted at Rs 6 lakh crore or 4.7 per cent of Gross Domestic Product (GDP). The net market borrowings of Rs 4.61 lakh crore have been budgeted to finance 86.8 per cent of the fiscal deficit.

As per the issuance calendar of dated securities released by the central bank in March, the government plans to borrow Rs 3.68 lakh crore in the first half of the current fiscal. The previous government had pegged the gross and net market borrowings for the current fiscal at Rs 5.97 lakh crore and Rs 4.57 lakh crore, respectively. Thus, the latest figures announced are higher by just Rs 3,000 crore and Rs 4,000 crore, respectively compared to the figures announced by the previous government.

Meanwhile, the rupee breached the 60 mark to close at 60.21 to a US dollar. The currency had ended at 59.76 per dollar on Wednesday. “The rupee ended weak due to fall in stocks and stop losses getting triggered in dollar short positions,” said Naveen Raghuvanshi, currency trader, DCB Bank.