Sentiment : Positive, post-auction
Markets reacted positively after the twin auction with prices of long gilts rising by 20 paise.
However, post-auction trades may have flattened the yield curve.
Prior to the auction, yields barely reacted to the news that the central bank would continue with its soft interest rate regime.
Yields on the benchmark 10-year bond was little changed, closing at 7.1744 per cent compared with the morning's 7.1716 per cent and Monday's close of 7.1730 per cent.
Trading hours on auction days seem to be extended.
Despite the auction, there were 12 bids worth Rs 20,000-odd crore at the repo auction. Of this, bids worth Rs 14,207 crore were accepted at a cut off of 5.75 per cent.
Outlook: Dealers do not anticipate interest in long-dated securities to continue because there are not many who would like to buy such paper.
Forex
Sentiment : Bullish
The rupee wound up at a new seven-month high of 48.5000/5025 per dollar compared with Monday's close of 48.5100/5175.
Corporates and exporters continued to sell dollars. The inflows also included foreign currency loans availed of by some firms.
State-owned banks were selling greenbacks in the morning but once the rupee touched the 48.50 mark, they started buying.
The six-month premium firmed up a bit but one-year premiums fell to close at 4.14 per cent today from 4.21 per cent on Monday.
Outlook: The rupee may break the 48.50 mark tomorrow on the back of dollar selling by corporates. It may trade in a range of 48.48-48.52. Fowards are likely to soften too, and the six-month forwards may touch the 4 per cent mark.
