Profit Sales Knock Wind Out Of Medium Gilts

Prices of government securities in the medium tenor crashed by 50- 70 points on the back of profit booking which got accelerated following the announcement of open market operations (OMO) and auctions on Wednesday.

In an already bearish market, a higher cut-off of 5.92 per cent on the 6.72 per cent 2014 paper led to fall in prices by around 30 basis points across the board.

However with weighted average yield on the auction working out to an much expected yield of 5.85 per cent, the market gained around 15- 20 basis points mostly in medium and long end of the maturity.

 

Ten-year paper 7.27 per cent 2013 closed higher at 5.90 per cent as against 5.76 per cent on Wednesday.

At present, 7.27 per cent 2013 paper is taken as the benchmark paper as 9.81 per cent 2013 is in shut period. The selling spree was continuing for quite some days but the volumes went up on Thursday owing to auctions and the OMO.

The profit taking was indulged in mostly by those who had picked up these bonds during the price rally period few days back.

Meanwhile, spot rupee opened at Rs 46.9901/47.00 per dollar following month end greenback demand from importers.

But it closed lower at Rs 47.07/09 per dollar as the demand for greenbacks were not matched by supplies.

The depreciation in the rupee was further accentuated by the global appreciation of the dollar against the euro. Thursday was the first time after some days that the rupee opened at Rs 47 levels.

The cash-spot dollar, however, closed at a par to quarter per cent premium as against at a discount on Wednesday.

While the market was volatile for the spot dollar, the six-month and one-year forward premiums closed flat around 0.85 per cent and 1.20 per cent, respectively, as against 0.81 per cent and 1.1.8 per cent respectively.

Dealers said volatility in the cash and spot markets with no action in premiums means there is no demand for forward cover as corporates expect the rupee to appreciate.

However, for month end demand, there is rush for cash dollars where the banks had to borrow under buy-sell swap to be settled two days later to the transaction date.