Bond volumes spurt

NEW DELHI, May 16: Trading volumes in bonds outside the inter-bank market colloquially, the telephone market have jumped more than 10 times since the slack season credit policy. Yields on taxable public sector bonds have dropped by around two per cent, while those on tax-free bonds have fallen by a smaller margin.

Banks and corporates, active in the telephone market, have seen their individual volumes rise by more than 10 times in the last four weeks. The telephone market is, by and large, an inter-corporate market where corporates deal with banks and financial institutions. Since trades in the segment are not routed through an exchange, precise data is not available.

The primary reason for the spurt in volumes is the excess liquidity injected into the system after the slack season credit policy. With interest rates coming under pressure on account of improved liquidity, players in the market are engaged in a hot chase for high-yielding paper. This has pushed down yields across-the-board on all kinds of paper, including government securities.