Dealers go easy on 10-yr gilt

Bond dealers were a merrier lot today with the 10-year benchmark 7.37 per cent gilt closing at a yield of 5.14 per cent on the last day of fiscal 2003-04 against a corresponding close of 6.20 per cent as on March 31, 2002.

The Fixed Income and Money Market Dealers' Association of India is expected to announce a yield to maturity for 10-year benchmark at 5.14-5.15 per cent tomorrow based on the weighted average of the yields of the trades done on March 31.

As evident from the yields, banks for most part of the maturities do not have to provide for depreciation on the trading portfolio.

Strong buying pushed up prices in the long end by 25-30 paise, while the medium tenure saw prices moving upwards by 5-10 paise.

However, in the short end of the maturity, the Reserve Bank of India signalled a hike in the interest through the cut-off yield announced in 91- day treasury bills auction held today.

The cut off yield on the paper was up by 12 basis point to 4.36 per cent against 4.24 per cent announced in the last auction held on March 24.

Dealers expect it is an effort to bring in rates in short end of the yield curve in alignment of the seven-year repo rate of 4.5 per cent.

Market players seem to have squared positions for the year end as repo subscriptions touched only Rs 24,800 crore against Rs 50,000 crored odd seen in the last weeks.

While one day repo received bids worth Rs 22,780 crore, seven-day repo witnessed subscriptions of only Rs 2020 crore.

One of the participants borrowed money through reverse repo at 6 per cent and dealers attribute it to either a primary dealer of bank.

This is because on the day of the financial closure, call money borrowing will require capital adequacy provisioning of 100 per cent for primary dealers and 25 per cent for banks.