Gilt yields expected to move in narrow range this week

Gilt yields are expected to move in a narrow range this week, but traders are awaiting the numbers for wholesale price index (WPI)-based inflation for September to be released on Monday. That will guide the direction of the yields movement.

“Yield on the 10-year benchmark gilt 8.15 per cent 2022 will be in the range 8.15-8.20 per cent. The yield moment will depend upon the WPI inflation data on Monday. If WPI inflation crosses eight per cent then yields will go for a toss,” said S Srinivasaraghavan, executive vice-president and head of treasury, Dhanlaxmi Bank.

On Friday, the 10-year benchmark gilt yield closed at 8.17 per cent or Rs 99.86 compared with the previous close of 8.16 per cent or Rs 99.90.

The WPI inflation for August rose to a higher-than-expected 7.55 per cent, as prices of potato, wheat and pulses as well as manufactured items soared. The number stood at 6.87 per cent in July. According to traders, if the August WPI inflation come above eight per cent, the Reserve Bank of India will surely maintain a status quo key policy rates in the second quarter review of the monetary policy on October 30.

The rupee against the dollar is expected to strengthen further from current levels. “I am expecting a range of Rs 52.3– 53] against the dollar this week. It will be stronger. There will be demand for dollar for trades, but RBI intervention will keep the rupee under check,” said Srinivasaraghavan. However, few traders expect the rupee to breach the Rs 53 mark sometime during the week amid dollar demand. According to Pramit Brahmbhatt, chief executive officer, Alpari Financial Services, the rupee is expected to trade in the range of Rs 52.2-53.2 this week.

The rupee ended near the day’s low on Friday due to aggressive dollar buying by importers. It ended at Rs 52.82 compared with Rs 52.69 against the dollar.