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| Bond yield to remain range bound |
| BS Reporter / Mumbai Jan 18, 2010, 00:18 IST |
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The yield on government bonds is expected to move in range awaiting fresh signals on monetary policy stance ahead of third quarter review.
Dealers said the government has completed majority of its borrowing. It has signaled that plans will not overshoot target of Rs 4,51,000 crore for 2009-10, taking away risk of pressure from fund-raising activity. The inflation, though moving up sharply, was in line with expectation. Inflation measured by wholesale price index vaulted to more than a year’s high of 7.31 per cent in December on higher food prices, mainly sugar, pulses and potato, adding to the government’s worries about price rise.
On Friday, the G-Sec market opened higher amidst continuation of yesterday’s positive sentiment. The results for G-Sec auction were also in line with expectations. However, the market tumbled at close on profit booking by participants.
The benchmark 10-year paper 6.90 per cent 2019 closed at Rs 94.58 implying a yield of 7.72 per cent. Meanwhile, Reserve Bank of India governor D Subbarao met the Union Finance minister on Saturday ahead of third quarter policy review on January 29, 2010.
Call rates to remain steady
The interest rates in inter-bank overnight lending market would remain range bound on ample liquidity in the market.
Banks have already made provisions for reporting requirements. Though the last fortnight of December 2009 saw a jump in credit off take, it hardly created pressure on resource base. On Friday, the systemic liquidity was abundant and money market rates remained soft. The overnight call rate was seen in a range of 2.65-3.35 per cent.RBI absorbed Rs 80,780 crore at the reverse repo window of Reserve Bank of India. It did not infuse any amount under LAF Repo operation.
Rupee to depict trend for appreciation
With strong capital flows in stock markets, the rupee will continue to depict tendency for appreciation. Currency dealers said the rupee is on a strong footing. However, dollar demand from importers would not allow a sharp appreciation of rupee. On Friday, the rupee closed at 45.78 against the dollar. The forward premium rates eased slightly at longer end. The six-month forward premium was ruling at 2.98 per cent.
The most actively traded currency future contract for dollar-rupee pair was January 27, 2010. The last traded price for this contract was Rs 45.8300.
The one-month rupee contract in the non-deliverable forward market is currently being traded at 45.74/45.84 to a dollar.
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