Bonds rise on RBI plans to sell less debt

Bonds rise on RBI plans to sell less debt
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First Published: Mon, Nov 19 2007. 11 13 PM IST
Updated: Mon, Nov 19 2007. 11 13 PM IST
Mumbai: The 10-year bonds advanced for the second day after the central bank halved the amount of debt it will sell this week to drain cash from the banking system.
The yield on the benchmark bond fell to the lowest in two weeks on the optimism that less supply will stoke demand for existing securities. Reserve Bank of India (RBI) had earlier stepped up sales of the so-called market stabilization securities to soak up money that threatens to push up consumer prices.
“There won’t be pressure on the liquidity situation in the near term,” said Manjayya Shetty, general manager of treasury at state-owned Vijaya Bank Ltd in Bangalore. “So yields have scope to decline.”
The yield on the benchmark 7.99% note due on July 2017 fell 1 basis point to 7.87% in Mumbai, according to the central bank’s trading system. The price rose 0.06, or 6 paise per Rs100 face amount, to 100.78. A basis point is 0.01 percentage point.
India’s inflation rate held near the lowest in five years after RBI this year raised borrowing costs twice, increased the limit on cash that lenders must set aside to cover deposits four times and lifted the limit on debt sales. Bloomberg
India’s inflation rate held near the lowest in five years after RBI this year raised borrowing costs twice, increased the limit on cash that lenders must set aside to cover deposits four times and lifted the limit on debt sales. Bloomberg
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First Published: Mon, Nov 19 2007. 11 13 PM IST