The Hindu Business Line : Bond dips on RBI signals

Bond prices fell by 60-70 paise after the Reserve Bank of India increased the auction amount from Rs 5,000 to Rs 9,000 crore. According to dealers, this is part of the central bank's inflation management measures.

"The RBI is gradually sucking out the liquidity as the M3 growth (money stock) is going up again," said a dealer with a private bank. On Friday, RBI announced the auction of two government papers instead of one, as was earlier scheduled.

"By increasing the auction amount when the market does not have appetite for even Rs 5,000 crore, the RBI is showing it is comfortable with the yields going up," the dealer said. The yields on bond increased by 10-11 basis points on Monday and are perhaps at a three-year high, the dealer said. The 7.59 per cent-10 year-2016 benchmark paper opened at Rs 98.07 (7.87 per cent YTM) and ended trade at Rs 97.82 (7.91 per cent) 70 paise lower from Friday's close of Rs 98.56 (7.80 per cent YTM). The 9.39 per cent-5 year-2011 benchmark paper opened at Rs 107.85 (7.49 per cent YTM) and ended at Rs 107.64 (7.54 per cent) down from the previous close of Rs 108.07 (7.44 per cent YTM). "The yields on the benchmark paper could touch 7.97-7.98 per cent by Thursday and may settle down at those levels," said a bond dealer.