Yields dip from seven-week high on borrowing status quo

Yields on the benchmark notes declined from near a seven-week high as Finance Secretary Ashok Chawla said in New Delhi on Monday that the government hasn’t decided on changes to the record Rs 2.41 lakh crore debt-sale schedule for the six months to September 30. Bonds also gained on speculation rising cash at banks will boost demand for the securities.

The yield on the 6.05 per cent note due February 2019 slipped four basis points to 6.66 per cent at the close, according to the central bank’s trading system. The price rose 0.27, or 27 paise per 100-rupee face amount, to 95.72.
 

CURRENCY PER DOLLAR
	Jan 1,09	Jun 1,09	% change
Indonesian rupiah	10,875.00	10235	5.89
Indian rupee	48.77	46.95	3.73
Thai baht	34.78	34.10	1.96
Korean won	1259.55	1237.25	1.77
Taiwan dollar	32.82	32.24	1.76
Hong Kong dollar	7.75	7.75	-0.01
Malaysian ringgit	3.47	3.47	-0.12
Singapore dollar	1.43	1.44	-0.23
Japanese yen	90.74	95.18	-4.89
Source : Bloomberg

 

“The government didn’t announce any additional borrowings over the weekend and that came as a bit of a relief for the bond market,” said Baljinder Singh, a trader at state-owned Andhra Bank. “Also, liquidity continues to remain ample.” The 10-year yields may move between 6.60 per cent and 6.75 per cent in the coming days, Singh said.

The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, rose. The rate, a fixed payment made to receive floating rates, climbed to 6.37 per cent from 6.22 per cent on May 29.

Re at 8-month high
The rupee closed at an eight-month high as local share purchases by foreign funds in May exceeded sales by the most in 19 months. It strengthened 0.3 per cent to 46.945 per dollar at the close, the strongest since October 1, according to Bloomberg data.

The currency rose, following its best month on record, as a rally in equities and commodities added to optimism signs of a global economic recovery are encouraging investors to increase holdings of emerging-market assets. The rupee also advanced as a gauge that tracks the dollar against six major currencies slumped to a five-month low, indicating demand for the greenback weakened.

Offshore contracts indicate bets the rupee will trade at 47.01 to the dollar in a month, compared with expectations for a rate of 47.18 at the end of last week. Forwards are agreements in which assets are bought and sold at current prices for future delivery.

Call steady, cash surplus meets demand
The overnight money rates ended stable on Monday as banks’ funding needs were nearly negligible given the trillion-rupees-plus excess liquidity in the system.

The rates ended its sixth straight week near the central bank’s key borrowing rate of 3.25 per cent on Saturday, on the back of boosted cash surplus after two bonds got matured in early April. Slowing credit growth also helped raise the level of free cash with banks, traders said.

The overnight call money rate ended at 3.25-3.30 per cent, from Friday’s close of 3.20-30. It had closed flat in a low volume market on Saturday. “Nothing changed in the call money scenario,” said a dealer at a foreign bank, who sees the rates around the reverse repo until the advance tax outflows in mid-June start affecting some banks’ balances.