The government securities market witnessed sharp fall in prices following the Federal Reserve move to raise the base Fed rate by 25 basis points from 4.5 per cent to 4.75 per cent. |
The bearish sentiment in the domestic bond market was shared by markets all across the globe leading with yield on 10-year US treasury bond going up by 10 basis points in one trading session to 4.80 per cent. |
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The yield on the top-traded 8.07 per cent 2017 paper closed at a three-year high of 7.5 per cent, up by seven basis point from 7.43 per cent on Tuesday. |
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One basis point is one hundredth of a percentage point. |
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Meanwhile, even as the liquidity condition remained easy, the RBI has decided to conduct a third tranche of repo and reverse repo auction on Friday (March 31) at 9.30 pm to ward off any liquidity problem faced by banks on the closing day of the financial year. The overnight call rates today ruled at 6/6.10 per cent. |
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According to market dealers, this is the first time in the past three-four years, the ten year paper has crossed 7.5 per cent. At present, the 8.07 per cent 2017 paper is treated as the proxy for ten-year maturity. |
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"The market got caught in a selling frenzy following the outlook of the Fed Reserve warning the market of continuous hike in future. The market till now had comforted with the expectation that this will be final hike in the Fed rate for the time being," said a dealer with the nationalised bank. |
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Incidentally, it was the first open market committee meeting of the new Fed governor Ben Bernanke after he took over from Alan Greenspan. |
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The prices fell by 30-40 paise across segments. |
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The forex market experienced a depreciation in the spot rupee dollar exchange rate. The spot rupee opened at a low of 44.74 to a dollar, 10 paise lower than Tuesday's close of 44.65/66 to a dollar. This was following a global strengthening of dollar against all major currencies. |
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However, inflows and dollar sales by nationalised banks helped the rupee to recover to 44.65 and finally close at 44.70 to a dollar. Easy liquidity led the premia on forward dollars close easy with the six-month and one-year premiums at 1.87 per cent and 1.76 per cent, respectively. |
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