MUMBAI: Indian government bonds gave up all gains to end marginally lower on Wednesday as traders pared positions ahead of the heavy 200 billion rupee ($3.32 billion) debt sale on Thursday in a holiday-shortened three-day trading week.
Bonds fell for a second straight session as traders freed up their portfolios to absorb the supply, since most bonds on offer are illiquid and are among the least traded, with yields of most ending at least 20 bps higher than the 10-year benchmark bond.
The high yields could spark devolvement if RBI is unwilling to pay such high returns, traders said.
"Primary dealers have sold adequate duration to make up for devolvement if any happens," said Kush Sonigara, an analyst with My Capital Solutions.
"Increased participation coupled with mixed cues will restrain bonds to move in a narrow range," Sonigara added.
The benchmark 10-year yield ended 1 basis point up at 8.96 percent, after falling as much as 5 basis points during the session to 8.90 pct.
Earlier in the session, bonds had risen on talk of suspected secondary market bond purchases from the Reserve Bank of India on Tuesday to possibly replenish the bonds due for maturity.
The 7.37 percent 2014 bonds were due to mature on Wednesday for 422.53 billion rupees. The total bond redemptions for the month stand at 1.39 trillion rupees.
Traders speculated about RBI's presence in the secondary market after the "Others" category in the electronic trading platform showed net purchases of 32.77 billion rupees.
In the overnight swaps market, the benchmark five-year rate and the one-year rate both ended up 1 basis point at 8.51 percent, and 8.60 percent respectively.
Comments
Comments are closed for this article.