Mumbai: Indian bonds climbed to one-month highs on 28 May 2007, boosted by the absence of market stabilization bonds (MSS) sales for this week and slowing inflation.
At 9:45 am, the yield on the 10-year federal bond was at 8.08%, compared with the previous close of 8.12%. It hit a one-month high of 8.03% at the open.
Traded volume was Rs1,735 crore in the first 45 minutes of trade, according to the central bank’s electronic trading platform.
“The MSS was the trigger. If they don’t take any further liquidity draining measures, bonds may rally further,” said a local trader.
MSS bonds are used to drain cash injected into the money market by the Reserve Bank of India’s intervention in the currency market to curb the rupee’s rise.
According to the RBI’s website, the total outstanding balance under the MSS stood at Rs88,802 crore as on 18 May, below a self-imposed limit of Rs1,10,000 crore.
The central bank last sold MSS bonds on 16 May and it usually announces the sale for the coming week on every Friday.
Declining inflation also supported bonds. Annual inflation in mid-May dropped to its lowest in eight months at 5.27%, down from 5.44% a week earlier, data showed on 25 May.