The government bond with balance maturity of seven years was the key traded paper today as dealers began to discard the 10-year bond, which is set to lose its benchmark status by the end of March.
The benchmark paper (6.35 per cent government paper 2020) hardened further to touch 7.97 per cent. It eased to close at 7.94 per cent as against the previous close of 7.95 per cent, according to data with the negotiated dealing system.
A head of a public sector bond house said one large foreign bank was active in offloading the benchmark paper and replace it with the seven-year security (7.02 per cent 2016 paper).
There is expectation the government may issue fresh 10-year paper in April as part of its new borrowing calendar for 2010-11. This means the paper maturing in 2020 will lose its benchmark status.
Though yields are rising across maturities, banks will prefer seven-year paper as its implications (hit on value) will be lower. Also, it would remain benchmark for few more months, said a treasury official with an associate bank of SBI.
This switchover to paper with lower maturity is to lessen the adverse impact on the investment portfolio as banks close their books for the year at end of the month for 2009-10.
Dealers said bond prices would continue to see erosion (yield will move up), partly on apprehension over drying up of liquidity in the near term as companies pay their last installment of advance tax and the Reserve Bank of India raising short-term policy rates.
The 10-year benchmark is testing the 8 per cent mark. The worry on the government borrowing calendar, though it will borrow less on net basis in 2010-11, and inflationary pressure due to hike excise duty on oil products companies are also driving up bond yields.
Rupee hits 6-wk high on Sensex, weak dollar
Rupee strengthened to a six-week high on Wednesday buoyed by a 1.4-per cent rise in the local stock market and broad losses in the dollar versus major currencies.
The partially convertible rupee closed at 45.82/83 a dollar, its highest since January 20, and 0.4 per cent above its close of 46.01/02 on Tuesday.
The euro rose against the dollar on Wednesday, hitting the day’s high as a Greek government source cited details of fresh plans to tackle Greece’s debt problems. The index of the dollar against six major currencies was down 0.2 per cent.
Emerging Asian currencies rallied across the board on Wednesday, with the Thai baht hitting a near two-year high, lifted by a firmer stock market and as investors cut long dollar positions. Dealers said the rupee looks to strengthen further after a decisive break of key resistance near 46 a dollar. Both the MACD and slow stochastics have generated bullish signals for the rupee, they added.
Dollar premiums in rupee onshore forwards also dropped as traders looked for a further rise in the rupee.
“The market fears the offshore market will dump dollars and get discounts into the one-month. That expectation is pushing premiums down here as well,” said an interbank dealer at a foreign bank in Mumbai.
One-month offshore non-deliverable forward contracts were quoted at 45.82/92.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX both closed at 45.9150, with the total traded volume on the two exchanges at a low $4.6 billion.
Call
Ends steady; flows to RBI reverse repo tender rise
Call money rate ended steady around 3.25 per cent today as liquidity was more than sufficient for banks to meet their daily reserve needs, said dealers. Today, the one-day call money rate ended at 3.00-3.26 per cent compared with the previous close of 3.00-3.30 per cent.
