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| Pressure on bond yields may ease |
| BS Reporter / Mumbai Sep 14, 2009, 00:08 IST |
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The yield on government bond securities is likely to ease on cues from Reserve Bank of India (RBI) to re-examine the current limits on bonds kept in held to maturity (HTM) category. Dealers said the pressure of large government borrowing remains and many banks have reached limit on HTM book.
They are unable to buy extra securities at auction as portfolio of long-term bonds in excess of HTM has to be marked to market. This exposes them to risks of price erosion when the yields are hardening.
The sentiment in G-Sec market improved tracking reported comments from RBI regarding re-examination of HTM norms for banks and good response to the auction on Friday. The cut-offs at the auctions were better than market expectations.
The benchmark 6.90 per cent 2019 paper closed at Rs 96.80 implying a yield of 7.36 per cent. The turnover on negotiated dealing system (NDS) was Rs 11,045 crore. The yield on benchmark paper had crossed 7.5 per cent.
Call rates to remain soft
The interest rates in inter-bank market are expected to remain soft on ample liquidity in the system.
The systemic liquidity was comfortable and the money market rates were stable. The overnight call rate hovered in the range of 2.75-3.30 per cent.The companies and financial institutions would pay second tranche of advance tax by September 15 but this was unlikely to put any pressure on the liquidity, dealers said. The RBI absorbed Rs 1,38,760 crore under Liquidity Adjustment Facility Reverse Repo operation.
Rupee may appreciate
The rupee may appreciate against the dollar on surge in stock markets’ sentiments, portfolio inflows and some signs of economic recovery. Indian rupee appreciated by 0.81 per cent during this week to 48.48 against the greenback.
The strongly positive data on factory output for India and China have buoyed the outlook for a global economic recovery, dealers said.
Foreign Institutional Investors (FIIs) bought an average of $159.3 million of stocks daily this week compared to sale of $39.2 million per day last week.
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