Bonds plunge as rate hike fears looms, call rates too slip

Government bonds fell sharply, extending their slide to a fourth consecutive day following heavy selling pressure from banks and corporates after the RBI Governor Raghuram Rajan's comments on inflation sparked fears of interest rate hike in next week's monetary policy review.
The overnight call money rates also closed lower due to lack of demand from borrowing banks amid ample liquidity in the banking system.
The 8.83 per cent 10-year benchmark bond maturing in 2023 tumbled to Rs 100.58 from Rs 101.0550 yesterday, while its yield shot up to 8.74 per cent from 8.67 per cent.
The 8.28 per cent government security maturing in 2027 slumped to Rs 93.75 from Rs 94.4850, while yield rose to 9.09 per cent from 8.99 per cent.

The 8.12 per cent government security maturing in 2020 also dropped to Rs 95.9150 from Rs 96.40, while yield rallied to 8.92 per cent from 8.83 per cent.
The 7.28 per cent government security maturing in 2019, the 7.16 per cent government security maturing in 2023 and the 8.24 per cent government security maturing in 2027 were also declined sharply to Rs 93.7375, Rs 88.3850 and Rs 93.50, respectively.
The overnight call money rate ended lower at 7.60 per cent from 8.10 previously after fluctuating widely between a high of 8.15 per cent and a low of 6.50 per cent. The 3-days call money also concluded weak at 8.60 per cent from 8.85 last Friday. It moved in a range of 8.65 per cent 7.75 per cent.

The Reserve Bank of India (RBI) under the Liquidity Adjustment Facility (LAF) purchased securities worth 70.42 billion in 18-bids at the three-days repo auction at a fixed rate of 7.75 per cent.