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Bond's Day Out!

The bond markets were expecting a rate hike, but RBI hiked CRR instead & brought smiles all around

These are the times of the unexpected. No one expected the stock markets to crash, let alone crash so badly. But it happened. No one expected the Reliance Power IPO to tank, but it did. Well, in keeping with the mood of the times, the RBI also did something that was least expected. It hiked the CRR by 25 basis points and didn't tinker at all with the key policy rates.

The bond markets were expected a rate hike, but thanks to RBI's softer stance in its annual policy statement, the hike didn't come. And obviously, the move has been received well by the bond markets as well as the stock markets. The Dalal Street and the adjoining Bond Street are happily cherishing the news.

Following the Reserve Bank of India's decision on Tuesday, bond yields dropped 20 basis points from an intra-day high of 8.14 per cent to 7.94 per cent on Tuesday. The debt medium term category rallied by 25 basis points on an average on April 29 and the Gilt: Medium and Long-term by 32 basis points. DBS Chola Triple Ace a Debt: Medium-term category fund gained 1.13 per cent, followed by Canara Robeco Income which returned 0.93 per cent. In the Gilt: Medium & Long-term HDFC Gilt Long-term gained 1.37 per cent, Reliance Gilt Long-term gained 1.25 per cent, Reliance Gilt Long-term PF gained 1.25 per cent and Canara Robeco Gilt gained 1 per cent.

On the April 17, 2008 the day RBI announced the hike in CRR from 7.5% to 8%, the Debt: Medium term category dropped 0.01 per cent and on the next working day that is on April 21 the category on an average cracked by 0.06 per cent.

Let's see what more of the unexpected can we expect!