Saturday, June 20, 2009

RBI to buy back bonds worth Rs 6,000 cr

Government bonds traded range bound ahead of RBI’s move to buy back securities worth Rs 6,000 crores from traders. On Friday, RBI will sold bonds worth Rs 15,000 crore. Dealers expect action to remain range bound in the coming days till the budget, when they expect some clarity to emerge on the government’s borrowing programme. The most commonly traded bond - the 5 year bond - however traded lower unaffected by the buy back news.

Its yield traded at 6.64% at 12 45pm, 3 basis points higher than its previous close. When yields rise, prices fall. The benchmark 6.05% paper only had trades worth Rs 20 crore. "The concern with OMO is that RBI has not been buying the whole amount that it says it will pick up from traders," saya RVS Shridhar, head of markets at Axis Bank.

"This is giving only mixed signal to the market. We will have to wait for the auction results. As for higher borrowings, market has been preparing for greater front loading of bond auctions," he added.

The rupee rose marginally on Thursday from one-month lows on Wednesday, although downswing in shares affected sentiment. At 12 45pm, the rupee was at 48.09 against the dollar, just above Wednesday's close of 48.13.

The dollar was steady against the euro on Thursday, trading lower after US inflation data further made in unlikely that Federal Reserve would raise interest rates by year end.

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