Long-dated gilts rallied on Wednesday, Thursday and Saturday last week on the back of ample liquidity and the announcement of a twin auction of long dated securities.
Corporate bonds moved in tandem with gilts. Yields on long-dated gilts came off by about five to 10 basis points, while that on long corporate bonds eased by about 10-15 basis points.
The yield on the benchmark 9.81 per cent 2013 gilt came off by about two basis points last week. On Saturday, this security was last dealt at 5.855 per cent.
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The announcement of auction of long paper on Wednesday, when the market opened after remaining closed on Monday and Tuesday, sparked off a rally in the long-term securities.
The government on Wednesday announced that the Reserve Bank of India would reissue the 6.25 per cent 2018 bond for Rs 5,000 crore and the 7.95 percent 2032 for Rs 2,000 crore on this Tuesday through price-based auctions using the multiple-price method.
In three trading sessions, beginning Wednesday, the yield on the 15-year and 29-year gilts came off by five and 10 basis points, respectively. On Wednesday, the 2018 gilt, prior to the auction announcement was dealt at a yield of 6.078 per cent (Rs 101.65).
After the auction announcement, it rallied to be last dealt at 6.016 per cent (Rs 102.25). Saturday this gilt was last dealt at an yield of 6.026 per cent (Rs 102.15).
Similarly, on Wednesday, the 2032 issue, prior to the auction announcement, was dealt at a yield of 6.43 per cent (Rs 119.90).
Post announcement, it rallied to be last dealt at 6.344 per cent (Rs 121.25). On Saturday this gilt was last dealt at a yield of 6.335 per cent (Rs 121.40). The rupee ended last week flat (on Thursday) at 47.3550/3575 per dollar as state-owned banks continuously absorbed dollars.
On Wednesday, it gained by over four paise on the back of five days of bunched-up dollar supplies to close at 47.3550/3575 as against its previous close of 47.39/40. On Tuesday, it wound up at 47.3275/3475 in other forex trading centres.
On Wednesday premiums ended sharply lower. The six-month annualised forward ended at 2.27 per cent against its previous close of 2.47 per cent, while the one-year forward ended at 2.51 per cent (2.62 per cent). On Thursday the six-month premium ended at 2.30 per cent and the one-year forward closed at 2.53 per cent.
Call money ended below the repo rate on all the three trading days.
Liquidity was ample as was reflected by the huge response to the Reserve Bank of India