Yields, rupee seen down on global risk aversion

The yields on government bonds are likely to open low but concerns on inflation and fresh supply in the holiday-shortened trading week may exert upward pressure. On Friday, yields on the 10-year benchmark government bond closed at 8.30 per cent, up from 8.25 a day ago. The bond yields traded in the range of 8.22-8.30 per cent last week.

“Uncertainty continues as the US Federal Reserve failed to give any indications of possible measures to support growth,” said a treasury official from a large public sector bank. As a result, investors may still opt for safer havens like bonds, he added.

The Reserve Bank of India (RBI) will auction dated government securities worth Rs 11,000 crore and Treasury bills worth Rs 10,000 crore this week. There will be no trading on Wednesday and Thursday on account of public holidays. “Yields are expected to range between 8.25 and 8.35 per cent this week,” said the official. Also, fading expectations of a nearing pause in the rate increase cycle will weigh on the yields.

The Interbank call money rate is expected to open higher as banks will borrow to meet reserve requirements at the start of new reporting fortnight and as there will be fewer working days. The call rates moved between 7.95 and 8.05 per cent last week. Liquidity for the week remained at an average of negative Rs 23,000-46,000 crore range.

Rupee closed the week at 46.16 against the dollar after touching an 11-month low on Thursday. The rupee registered a weekly loss of 0.89 per cent last week. The Indian currency has moved in tandem with the domestic equities as the foreign institutional investors pulled out. Dollar demand from oil importing companies also kept rupee from gaining. “Most exporters sold their first two months’ proceeds, so dollar sales may come down this week,” said a forex dealer with a domestic brokerage. He expects rupee-dollar pair to trade in the range of 45.80-46.35 this week.