India Bonds End Sharply Down On Reserve Banker's Remarks
Tuesday, February 15 9:04 PM SGT
BOMBAY (Dow Jones)--Indian bonds ended sharply lower Tuesday in reaction to a warning from Reserve Bank Deputy Governor Y.V. Reddy that the bond market shouldn't be so exuberant.
"I expect market participants to realize that excessive enthusiasm isn't a very good thing," he said.
Prices finished off session lows, however, with some buying toward the end of the day.
Prices also fell because of the Reserve Bank's sale list offered bonds at lower than market levels, dealers said.
The Reserve Bank had earlier Tuesday offered 12.32%, 2011 bonds at 112.75. Later the Reserve Bank revised its list to replace it with 12.25%, 2008 bonds at 111.20.
Dealers said the market has turned extremely cautious after Reddy's statement. "Everybody is following a wait-and-watch policy. Not many people want to sell and book losses," a dealer at a private bank said.
Dealers said the market is watching Reserve Bank's next move. Giving the liquidity crunch, they said they expect the Reserve Bank to announce a purchase list of bonds to infuse liquidity into the market.
The market is also awaiting figures on the amount of bonds sold by the Reserve Bank Tuesday. "Much of the movement in the call market will be driven by this," a dealer at a primary dealing house said.
The call rate ended Tuesday at 10.50%, up from the previous close of 9.50%, and dealers said they won't be surprised if the call rate jumps above 11% Wednesday on lack of money supply.
The following are indicative prices of government securities at 1200 GMT Tuesday:
Security Maturity Current Price Previous
11.99% GOI 2009 109.40 110.90
11.83% GOI 2014 107.55 109.40
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