The yield on the 10-year benchmark government paper fell to an intra-day low of 7.81 per cent, the lowest in three weeks, as contradictory statements from the government and the central bank kept traders guessing.
The yield on the 6.35 per cent paper due in 2020 closed at 7.90 as against 7.97 per cent yesterday, according to data on the Clearing Corporation of India website. The yield fell from the day’s high of 7.95 per cent after ratings agency Standard & Poor's revised the country's outlook to stable from negative, citing improvement in public finances.
Volume was heavy at Rs 11,990 crore on the central bank's trading platform.
The treasury head of a public sector bank said yields fell after an agency report said the government was planning not to borrow heavily in the first half of the next financial year. However, the yield rose later in the day after Reserve Bank of India Deputy Governor KC Chakrabarty said the government programme would be in all probability more frontloaded.
“March is also a month of low volumes and light activity. We expect bond yields to be stable in the range of 7.80-7.90 per cent till the government borrowing programme is announced,” said Arvind Sampath, head of bond trading at Standard Chartered Bank. The fear of a rate hike in the wake of rising economic activity as also the large government borrowing planned for the next financial year had resulted in the yield on the benchmark government bond touching a 17-month high of 8.02 per cent last week.
Rupee down on dollar rise
The rupee on Thursday moved away from two-month highs touched in the previous session, as the dollar gained against the euro and Standard & Poor's raising the country's outlook did little to lift sentiment. The partially convertible rupee ended at 45.4450/4550 a dollar, 0.2 per cent weaker than 45.34/35 at close on Wednesday when it had risen to 45.3325, its strongest since January 11.
S&P on Thursday affirmed its ratings on India and raised its outlook to stable from negative, on expectations that the country's fiscal position could begin to recover and the economy would remain on a strong growth path.