The Hindu Business Line : Bonds recover after sharp fall

WITH no cut in rates in the Credit Policy, there was some disappointment in the Government securities market on Monday, with prices falling by as much as Rs 1.50 intra-day.

However sentiment improved on buying interest by players at low levels which led to a recovery of sorts.

With the Reserve Bank of India to submit the "Report of the Internal Group on Liquidity Adjustment Facility'' soon for public comments, there are expectations that the structure of the short-term interest rate could be changed.

And this could be accompanied by a repo rate/short-term interest rate cut, said money market participants.

"Markets were in an over-sold position today with players sitting on pots on cash. Once prices fell several traders and nationalised banks came in to buy, leading to a small rally,'' said Mr M.S. Gopikrishnan, Senior Vice- President, IDBI Caps.

Traded volumes were at Rs 4,500 crore in tune with the average.

Among the actively traded papers was the 7.27 per cent 2013 paper which opened at Rs 116.73 and fell 73 paise to an intra-day low of Rs 116 after the policy, but later recovered to end at Rs 116.60 with a corresponding yield of 5.10 per cent.

The sentiment in the market was reviving with liquidity improving and the ten-year benchmark was expected to hover at 5.50 per cent for sometime, said the chief dealer in a private sector bank.

On the long-term, the 6.17 per cent 2023 paper opened at Rs 104.35, fell by Rs 1.60 to Rs 102.75, but later gained to close higher at Rs 103.55.

Liquidity in the bond markets improved with amounts as high as Rs 9,610 crore absorbed by RBI through the one-day repo from the previous week's lows of Rs 1,000 crore.

Three bids worth Rs 535 crore were also accepted through the 14-day repo at the rate of 4.50 per cent.

In the inter-bank call money market, rates were soft with the lowest call rate at 4.25 per cent.

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