Virmani said RBI has taken and will take "appropriate action" to control inflation expectation. "It is RBI's job to control inflation expectations," he said in an interview.
"The way the government officials are coming out with statement every other day, we can assume that something more is in the making," said the head of a primary dealership.
The 8.24 per cent, 2018 gilt ended at Rs 92.50 or 9.4269 per cent yield to maturity compared with Rs 93.15 or 9.3187 per cent on Wednesday. Gilt prices tumbled almost a rupee in a single deal, but most dealers attributed it to "punching error" or an error in reporting the price of the bond.
A sharp recovery in prices in consecutive deals indicated the error, dealers said.
"I think it was more of an error in punching the price. Market sentiment was anyway weak, but such a fall in prices was unlikely," said a dealer.
Prices recovered almost 50 paise after the Re 1 fall.
Earlier in the day, market participants chose to ignore RBI Deputy Governor Rakesh Mohan's comments as mere reiteration of the central bank's stance. Mohan said RBI's assessment has not changed since the last monetary policy action on Jun 24.
Calls stay above 9%
The inter-bank money rate ended above 9 per cent on Thursday because demand stayed strong even as liquidity also was tight, dealers said.
The one-day call rate ended at 9.05-9.15 per cent compared with 9.00-9.05 per cent yesterday. "Demand stayed strong through the day and with cash supply also tight, call rate had to stay firm," said a dealer.
Typically, demand for funds is strong in the first week as many banks prefer to cover most of their reserve needs.
