Gilts may weaken further as comments from Finance Secretary D Subbarao on Saturday indicated that more monetary measures from RBI to tame inflation is almost a given now.
The Wholesale Price Index-based (WPI) inflation for the week ended June 7 surged to a 13-year high of 11.05 per cent factoring in the hike in fuel prices from June 5.
The ten-year gilt yield is likely to touch 8.75 per cent on Monday. The 10-year paper is seen in the 8.65-8.75 per cent band. It ended at 8.63 per cent on Friday.
Call rates: Headed north
The one-day call money rate is expected to open firm around 8 per cent on Monday as banks will step up borrowings to meet reserve needs for the new Reporting Fortnight.
The overnight rate had ended at 8-8.20 per cent on Friday for 2-day loans.
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Rupee: RBI to rescue
RBI will make efforts to keep the rupee value stable. The rupee did not breach Rs 43 to a dollar mark. Any further weakening of the rupee is likely to make imports costly.
A treasury head of a public sector bank said RBI has an eye on implications of the depreciation.
A weak rupee means the country will have to pay more to import crude oil, which is already ruling high. This could put addtional pressure on inflation.
The country's foreign exchange reserves decreased by $4.97 billion for the week ended June 13, 2008. Forex reserves of RBI are now worth $310.69 billion.