Ten-year bonds were little changed after this week’s losses, amid speculation that investors would pare holdings before a sale of government debt this week.
The finance ministry plans to raise Rs 14,000 crore ($2.8 billion) by selling securities maturing in 2018, 2021 and 2041 at an auction on January 20, the central bank said in an e-mailed statement after trading hours yesterday. “Demand for bonds is going to weaken after the auction announcement,” said Roy Paul, a deputy general manager of treasury at Federal Bank Ltd in Mumbai. “Yields will adjust upward in the next few days to accommodate the supply.”
The yield on the 8.79 per cent bonds due November 2021 was little changed from yesterday at 8.22 per cent in Mumbai, according to the central bank’s trading system.
The cost of one-year interest-rate swaps, derivative contracts used to guard against fluctuations in borrowing costs, climbed for a second straight day. The rate, a fixed payment made to receive floating rates, was 8.07 per cent, compared with 7.94 per cent yesterday.
Call rate recovers
Call rates recovered at the overnight call money market here due to fresh demand from borrowing banks, amid scarcity of liquidity in the banking system. It moved in a range of 9.40 per cent and 8.75 per cent before concluding higher at 9.00 per cent, compared with 8.70 per cent yesterday.
