The yield on government bonds may soften on Monday, reflecting RBI Governor D Subbarao’s statement on the easing of pressure on inflation.
The yield on 10-year benchmark paper (7.80 per cent govt bond 2020) fell by six basis points to 7.97 per cent on Friday. There was devolvement on primary dealers of Rs 1,387 crore in auction for benchmark paper. The cut-off rate for auction of 10-year paper was set at Rs 98.45 implying a yield of 8.03 per cent.
The G-Sec markets went up as devolvement in auction was interpreted by the market as RBI’s reluctance on higher yields, a dealer with a public sector bond house said. Comments by the governor in Bangalore on Friday that “inflation pressures are easing” helped the market. He said there was evidence of inflationary pressures easing, but sidestepped questions on policy outlook, saying “make haste slowly”.
Call rates may stay firm
The interest rate in the overnight inter-bank market is expected to stay firm, as banks increase their reserve requirements for the new reporting fortnight. On Friday, RBI conducted two sessions of Liquidity Adjustment facility. The net amount absorbed by RBI was Rs 11,815 crore. The overnight call rate moved in a range of 4.5-4.7 per cent.
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