G-Sec/Bond market update
After a hefty 8 bps points jump on last Friday due to decision to free up fuel price (read MB update here), G-sec markets opened the week on a strong note. Announcement by RBI that the borrowing amount for the week will be at the reduced levels kept the sentiments up. Yields on benchmark 10 year bond 7.80% 2020 fell 6 bps to 7.59%.
Following 3 days also witnessed buying and yields fell to 7.52% till Thursday. This was the lowest close on yields since June 9, 2010.
Positive sentiments in the bond market were also enhanced due to the rally in US treasuries. Primary articles’ inflation came in at a lower figure of 14.75% for the week ended 19 June compared to 17.6% for the earlier week. Fuel index also came in lower at 12.9% compared to 13.18% for the earlier week. This also kept the sentiments positive in bond market.
Friday however saw some correction with profit booking coming in at higher levels. Yields on benchmark bond increased 4 bps to 7.56% over Thursday. On a weekly basis, the yields have decreased 10 bps.
Govt sold bonds worth Rs 10,000 cr all which were fully subscribed and yields were at the expected level. Liquidity in the system remained tight with average volumes on Repo window stood at Rs 63,400 cr.
The rate hike of RBI (read MB update here) was announced after market hours and hence the weekly closing yield does not factor in the hike. It is expected that bonds will open on a weaker note on Monday and the sentiments would carry on for the week. Thus yields should trade with a positive bias for next week.
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