The debt market sprung a surprise with hardening of bond yields as market players were gripped by inflation fears on account of higher excise duty and petroleum prices.
The yield on the 10-year benchmark (6.35 per cent 2020) at close of trading was 7.86 per cent, three basis points over the previous close.
Dealers said the borrowing programme for 2010-11 and fiscal targets were in line with market expectations, which was a big positive for the market.
Bond yields eased in morning trades. The 10-year yield dipped to 7.77 per cent from the opening level of 7.82 per cent but soon begun its upward march to touch the day’s high of 7.89 per cent. As Petroleum Secretary S Sunderasan announced a hike in petrol and diesel prices, yields eased.
A head of treasury with a large public sector bank said with long holiday ahead, nobody wanted to keep a trading position. Hence, prices of bonds declined, pushing up yields.
Rupee rises to 46.09
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The rupee appreciated against the US dollar as stock indices rose on Budget announcements. The rupee was trading at 46.30 in morning trades.
Satyajit Kanjilal, founder & CEO, Forexserve, said, “By and large, in the near term, the rupee is expected to be buoyant. International developments will play a role in shaping the future of the rupee.”
The dollar is poised to strengthen in the interim. That does not auger well for the rupee in the near future. The rupee was right now likely to bask in the “afterglow” of the Budget and a breakout in the stock markets, dealers added.
Call rates stay steady
The call rates in the interbank market remained soft and moved in the range of 2.0-3.30 per cent on ample liquidity in the system.
Ahead of the Holi weekend, banks parked about Rs 47,430 crore through the Reserve Bank of India’s reverse repo window, usedas a tool to suck out excess liquidity from the system.