Bond Prices Fall Steeply – March 31 , 2009

Bond prices plummet in intra-day trade on March 30 before rallying to recover some of its losses. The price of the benchmark security closed 40 paise lower after falling by more than Rs 1.50 in day trade. The prices dwindled after news reports quoted the Reserve Bank of India''s Deputy Governor, Dr Rakesh Mohan, saying that private placement of bonds with the RBI should be avoided. This sparked off supply concerns in the market, said a dealer with a private bank. Nevertheless, the markets recovered after expectation that the net supply of Government securities would be only around Rs 91,000 crore in the first half of the next fiscal and not as feared. After the redemptions and the open market operations, the net inflow would match the demand for the securities, the dealer added. Total traded volumes on the order matching system were higher at Rs 6,525 crore (Rs 4,190 crore). The 6.05 per cent-10-year-2019 paper opened at Rs 93.5 (6.97 per cent YTM) and fell to touch an intra-day low of Rs 92 (7.19 per cent YTM). It recouped its losses to close at Rs 92.8 (7.07 per cent YTM), against Thursday''s close of Rs 93.19 (7.01 per cent YTM). The second most highly traded paper, 7.46 per cent-2017 paper opened at Rs 101.75 (7.17 per cent) and closed at Rs 101.60 (7.20 per cent YTM).