Forwards in premium zone after a long negative run

Forward dollars across maturities closed in premium territory after ruling at a discount for a long time as importers rushed to cover payment obligations.

This assumes significance because importers rushed to cover when the month-end demand for dollars were over "" when the rupee was appreciating, that is. Now with the rupee depreciating, the outlook has changed and therefore the importer hedging pattern.

While spot rupee remained rangebound after opening at 45.42/44 per dollar and closed after gaining to 45. 35/37 per dollar, bond prices fell with ten year benchmark 7.37 per cent 2014 closing at 5.30 per cent.

Forward dollars closed at 0.08 per cent for one month, 0.14 per cent for three months, 0.20 per cent for six months and 0.26 per cent for one year maturities today.

Dealers are of the view that forward dollars have been gradually moving towards premium taking a cue from the spot market, which is reeling under a bearish outlook. This affected the importers psychologically as hedging their import payments will be expensive now, said a dealer.

Taking a forward cover has also become bit expensive as the London interbank bid-offer rate has also gone up over a period. Six-month Libor, which used to rule around 1.02/03 per cent few months back has firmed up to 1.58 per cent.

In the government securities market, selling by mutual funds and banks led to a 25-30 paise fall in the long term segment, while medium-term gilts witnessed a 10 paise fall.

With a bearish outlook, dealers are of the view that the 24-year government paper due for auction on Thursday might get devolved on primary dealers.

Gilts mart participants are expecting a cut-off yield of 6.20-30 per cent for the 24-year paper and 5.60 per cent for 12-year paper. They said that if the cut-off yield is below these levels, the market might see some buying demand.