The rally in the gilts market finally came to an end on Tuesday due to profit booking. The yield on the 10-year benchmark gilt yield 8.15 per cent 2022 rose marginally and ended at 7.91 per cent compared with the previous close of 7.90 per cent.
The rally began on December 21 and the yield on the 10-year benchmark gilt kept falling till the previous trading session.
The rally was due to the expectation that the Reserve Bank of India (RBI) will cut the repo rate in the third-quarter review of the monetary policy on January 29.
On December 21, the yield was at 8.15 per cent.
RBI had cut the repo rate by 50 basis points in the first quarter policy review. Most market participants expect RBI to cut rates by 25 basis points on January 29.
Call rates end higher
Overnight money rates remained firm on sustained demand from borrowing banks.
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The rate finished slightly higher at 8.10 per cent from 8.05 per cent yesterday. It moved in a range of 8.15 per cent and 7.90 per cent.
RBI under the liquidity adjustment facility purchased securities worth Rs 80,865 crore in 25 bids at the one-day repo auction at a fixed rate of eight per cent.
The central bank sold securities worth Rs 5 crore in one-bid at the one-day reverse repo auction at a fixed rate of seven per cent in the evening auction.