npavan78
14-06-2008, 09:15 PM
The repo rate hike led to aggressive selling of government securities (G-sec) by banks and mutual funds on Thursday to rebalance the portfolio and purchase the paper at lower prices.
Prices across maturities fell by 30-50 paise, resulting in yields going up by 5-10 basis points. The yield on the ten-year benchmark 8.24 per cent 2018 closed at 8.32 per cent after reaching an intraday high of 8.36 per cent. It had closed on Wednesday at 8.26 per cent.
There was not much trading in short-term instruments. Dealers said the apprehension on tight liquidity was likely to impact the shorter end of the maturity, which may lead to further rise in yields and fall in prices.
While the selling started with the opening of the trading session, the buying interest came up towards the end, when prices had sufficiently gone down.
Dealers added since the market did not expect any further rate signals from RBI anytime before the monetary policy review towards end of June, fresh buying demand would come in once the liquidity situation eased.
Rupee: Ends flat
On the back of apprehensions of a tight liquidity situation in the coming weeks, banks booked forward dollars aggressively beforehand to ensure supply to their customers next week when there would be a need.
This pushed up the premia for the rupee for booking forward dollars, especially in the shorter end of the maturity.
Annualised premia for one month and three months shot up to a high of 4.36 per cent and 3.49 per cent as against 3.09 per cent and 2.49 per cent on Wednesday.
The spot rupee, on the other hand, opened stronger at 42.77-79 after closing on Wednesday at 42.86-87 to a dollar. Dealers said the market was buoyant as the repo rate hike means higher interest rate differential for the foreign institutional investors and they expected higher forex inflows.
However, a less enthused equity market and import buying by public sector enterprises led it to fall to a low of 42.87 before closing for the day at 42. 84-85 to a dollar.
Prices across maturities fell by 30-50 paise, resulting in yields going up by 5-10 basis points. The yield on the ten-year benchmark 8.24 per cent 2018 closed at 8.32 per cent after reaching an intraday high of 8.36 per cent. It had closed on Wednesday at 8.26 per cent.
There was not much trading in short-term instruments. Dealers said the apprehension on tight liquidity was likely to impact the shorter end of the maturity, which may lead to further rise in yields and fall in prices.
While the selling started with the opening of the trading session, the buying interest came up towards the end, when prices had sufficiently gone down.
Dealers added since the market did not expect any further rate signals from RBI anytime before the monetary policy review towards end of June, fresh buying demand would come in once the liquidity situation eased.
Rupee: Ends flat
On the back of apprehensions of a tight liquidity situation in the coming weeks, banks booked forward dollars aggressively beforehand to ensure supply to their customers next week when there would be a need.
This pushed up the premia for the rupee for booking forward dollars, especially in the shorter end of the maturity.
Annualised premia for one month and three months shot up to a high of 4.36 per cent and 3.49 per cent as against 3.09 per cent and 2.49 per cent on Wednesday.
The spot rupee, on the other hand, opened stronger at 42.77-79 after closing on Wednesday at 42.86-87 to a dollar. Dealers said the market was buoyant as the repo rate hike means higher interest rate differential for the foreign institutional investors and they expected higher forex inflows.
However, a less enthused equity market and import buying by public sector enterprises led it to fall to a low of 42.87 before closing for the day at 42. 84-85 to a dollar.