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Government bond yields are expected to fall further this week on expectations of a repo rate cut by the Reserve Bank of India (RBI) in the monetary policy statement of 2013-14 to be announced on May 3.
The rupee is expected to strengthen further from current levels.
Government bonds rallied for the fifth straight session on Thursday with their yields dropping to the lowest level since July 2010.
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The rally was driven by improving trade data and falling commodity prices as these two factors are expected to give more comfort to the apex bank in cutting the repo rate further.
The yield on the 10-year benchmark government bond 8.15 per cent 2022 fell to 7.75 per cent on Thursday, the lowest level since July 28, 2010. It ended at 7.78 per cent compared with the previous close of 7.80 per cent.
On Friday, the market was closed on the occasion of Ram Navmi.
According to dealers, this week the yield may drop to 7.65 per cent and before the monetary policy it can drop to 7.60 per cent.
The rupee is expected to strengthen further this week.
According to dealers, the Indian currency is expected to trade in the range of 53.50-54.50 per dollar this week.
The rupee closed at 53.97 to the dollar on Thursday, stronger than its close of 54.21 on Wednesday. The range was 53.96 to 54.24 during the day.
The rupee strengthened with the underlying sentiment remaining bullish on the back of growing hopes for a repo rate.
