How bond traders incurred losses after rating upgrade

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MUMBAI: Several bond traders were caught on the wrong foot Friday, with the benchmark yields sliding as much as 12 basis points after having hardened over the past one week.

Those shorting the market expecting a fiscal slippage were seen rushing for cover early Friday, hours after Moody’s unexpectedly raised India’s sovereign rating.

“Overnight short-positions triggered a sharp fall in bond yields initially,” said Naveen Singh, senior vice-president at ICICI Securities Primary Dealers.

“But it failed to improve the broad market sentiment as we erased gains later in the day.”

Some large foreign banks and funds that had short-sold sovereign bonds rushed to cover their positions as the market reversed its rising trend after Moody’s unexpected rating upgrade.

India has finally obtained a sovereign rating upgrade after more than a decade, with the government pushing economic reforms.

“Trading was intense on Friday as the benchmark swung sharply during the day. Some overseas investors were seen selling in the debt market,” said Ashish Vaidya, executive director and head of trading and asset liability management at DBS Bank.

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