Yields on gilts and corporate bonds headed northward for the major part of last week on account of redemption pressure on mutual funds and fears that the US may launch military strikes against Iraq.
The rupee, however, ended the week at a 13-month high of 47.8850/8925 per dollar on the back of good greenback inflows. Forward premiums also edged up substantially as corporates sought to hedge their exposures. The benchmark 9.81 per cent 2013 gilt, which Monday was last dealt at a yield of 5.8715 per cent, ended the week at a yield of 5.9710 per cent.
In fact, the last trading day was marked by volatility with gilts prices dipping by one to two rupees. However, all the losses were wiped out later in the day.
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The benchmark 10-year gilt opened at a yield of 5.893 per cent (Rs 130), edged up to 6.093 per cent (Rs 128.20) and was last dealt at 5.971 per cent (Rs 129.30) on Saturday.
The long-dated 10.18 per cent 2026 gilt opened at a yield of 6.507 per cent (Rs 144) on Saturday, inched up to 6.570 per cent (Rs 143) and was last dealt at 6.438 per cent (Rs 145.10). Except on Tuesday and Wednesday, when yield of gilt came off a bit on account of a slight improvement in funds supply, gilt yields continuously hardened.
It was a one-way street in the corporate bond market as yields edged up every trading day of the week. The benchmark five-year Hindalco paper, which Monday was quoted at an yield of 5.95/97 per cent, finished the week at 6.20 per cent.
On Saturday alone yield on this paper was up by 13 basis points. Call money rates, which were dealt higher in the 5.75-6.25 per cent levels on the first four trading days, eased to the 5.10-6.00 per cent band on the reporting Friday and finished the week in the 5.50-5.75 per cent band.
Indian banks on Monday launched a new product - collateralised borrowing and lending obligation (CBLO) the that will deepen the money market and provide another investment avenue for the cash-flush banks.
The rupee, which Monday closed weaker at 47.9475/9575 per dollar as against the previous Friday