Bonds may gain on benign interest outlook

The yield on government bonds is likely to be impacted by the prospect of a soft interest rate trend in the near future.

Dealers said the government borrowing plan remains on course. It plans to raise Rs 10,000 crore through bond auction on November 13. There is less pressure on yields now, compared to what was felt in the first half due to huge borrowings.

Some global factors like the trend in the US bond market may also weigh on the market sentiment.

On Friday, the G-Sec market traded on an apprehensive note ahead of the auction. A better-than expected cut-off for auction led to some recovery in the market. The benchmark 10-year paper (6.90 per cent 2019) closed at Rs 97.18, implying a yield of 7.31 per cent.

 

While yields may not show large swings, the market has not lost sight of indications about large government borrowings (Rs 4.6 lakh crore) in the next fiscal year (2010-11).

Re may move in range 
The rupee is expected to trade in a range, with bias towards appreciation against the US dollar.

The capital flows, including portfolio investment in the stock market and movement of dollar against global currencies, would impact the rupee trades next week, currency traders said.

On Friday, the Rupee closed at Rs 46.82 a dollar. The forward premium eased across the curve and the six-month forward premium was stood at 2.71 per cent.

The rupee rose as gains in the stock market strengthened expectations of capital inflows and the dollar’s losses overseas lifted sentiment.

The flow of funds could go up on improvement in the economic climate and signals about further reforms through steps like further disinvestment of stake in public sector enterprises, dealers said

Call rates remain steady 
The interest rates in the inter-bank fund market will remain steady on the back of ample liquidity in the system.

The liquidity in the system was comfortable and the money market rates were stable. The Mumbai Interbank Offered Rate (MIBOR) was at 3.29 per cent. The overnight call rate was seen in the range of 3-3.3 per cent. Reserve Bank of India absorbed Rs 72,550 crore under Reverse Repo operation. It did not infuse any amount under the Liquidity Adjustment Facility Repo operation.