Gilts crashed yesterday by Rs 3 at the long end and yields surged 15 to 20 basis points as a consequence of Reddy's statement. The RBI's move to put three medium-dated papers on the open market operations (OMO) list at prices 15 basis points higher than the prevailing market rates also contributed to the crash.
The RBI sucked Rs 2,000 crore through OMO and announced a revised sale list for today.
The 11.83 per cent 2014 gilt, trading at Rs 110 on Monday, dropped to Rs 107 after Reddy's statement before bouncing back by 50 paise at close. In the short end, prices fell 50 paise to Rs 1, while the medium-term paper dropped by Re1 to Rs 2.