Bond yields, rupee likely to dip

Government bond yields, rising in the recent past, might see some fall this week, owing to value buying by investors in anticipation of one more rate cut later in the financial year.

Last week, the Reserve Bank of India (RBI) had cut the repo rate by 25 basis points (bps) to 7.25 per cent but the market interpreted the guidance as hawkish, due to which yields rose. It was only on Friday that did the yields fell.

According to Ashutosh Khajuria, president (treasury) at Federal Bank, bond yields also rose last week, tracking the rise in yields in the US and euro zone.

Bond traders believe the fall in yields might continue but the scope for further decline is limited, as the next rate cut by RBI is expected after some months.

On Friday, yield on the 10-year benchmark bond ended at 7.98 per cent, compared with the previous close of 8.01 per cent, while the yield on the new 10-year bond ended at 7.79 per cent, compared with the previous close of 7.80 per cent.

Meanwhile, the rupee is seen trading with a weak bias this week, as currency traders believe dollar demand from companies will continue.

“The broad trading range might be between 63.75 and 64.25 a dollar, with a weakening bias,” said Sandeep Gonsalves, forex consultant and dealer at Mecklai & Mecklai.  The rupee ended at 63.76 a dollar on Friday, against the previous close of 64.01.