Long-dated gilts abuzz after auction calendar release

The bond market saw a big rally in 15-20-year tenor papers as the Reserve Bank of India's (RBI) auction calender for the next fiscal released on Thursday did not indicate great supplies of long-dated paper.

Short-term papers, on the other hand, remained stagnant as market players felt that there is abundant supply at this end of the curve. Moreover, yields in the short-term are also expected to go up.

The yield on the ten-year benchmark 7.37 per cent 2014 closed around 5.16 per cent as against a closing of 5.17 per cent on Thursday.

The RBI came out with a government borrowing programme for Rs 59,000 crore to meet the central government's fund requirements in the first of the 2004-05 against Rs 80,000 crore in the corresponding period of the current fiscal.

The general sentiment was boosted on Friday by a lower-than-expected government borrowing target for the next fiscal year and comments by the central bank head he expected these borrowings to be smooth.

Bond traders said the market stabilisation plan could significantly suck out liquidity from the system. The move had lifted the bond market sentiment this month.

The government will issue Rs 60,000 crore worth of securities under the market stabilisation scheme in the first half of next fiscal year to drain out surplus cash created by strong foreign exchange inflows.

RBI governor Yaga Venugopal Reddy said on Thursday he expected the government's borrowing programme to be conducted smoothly and without significant impact on money market liquidity.