Having already built up positions in anticipation of the Reserve Bank of India (RBI) cutting signal rates in the forthcoming review of the monetary policy, players are seen taking a breather.
The market has rallied quite a bit in the last couple of months on the back of the August-end repo rate cut and expectations of signal rates being trimmed in the review of the monetary policy on November 3.
Volumes in the market thinned last week compared with what it was two weeks ago. Month-end redemption pressure on mutual funds may lead to some selling in the market and will keep it range bound.
The level of the rally in the last couple of months can be gauged by the fact that the yield on the best rated PFC 2008 paper softened by about 75 basis points, from 5.93 per cent in August-end to the present level of 5.17-5.20 per cent.
Spreads, too, have come down correspondingly from 80-90 basis points to 50 basis points now. The Oil and UTI bonds will continue to be the favourite resource deployment instruments for mutual funds due to their inherent liquidity.
Dealers aver that despite not having the statutory liquidity ratio (SLR) status, these bonds, in fact, have more liquidity (bid/ask spreads are quoted at a differential of only two basis points) than the corresponding maturity sovereign papers.
The National Textiles Corporation (NTC) is currently in the market to mop up Rs 500 crore through a five year 6.35 per cent bond issue.
