The yields on government bonds are likely to remain subdued next week, ahead of release of figures for inflation in July.
While the market has factored in the rising trend of inflation, there would be immediate movement in yields after data is released (on Monday). The band of movement might not be more than five basis points for 10-year paper, said treasury executives.
Besides inflation data, market would also watch for the steps that are likely to be announced by the government to contain the fiscal deficit.
Investors remained on the sidelines on Friday ahead of the wholesale price index data for July. The yield on the 10-year benchmark (8.15 per cent 2022) closed at 8.16 per cent, higher than Thursday’s close of 8.14 per cent.
The headline WPI inflation has remained sticky at above seven per cent. This has been on account of an increase in food prices, rise in input costs and upward revision in prices of some administered items, such as coal. The central bank, in its first quarter policy review, raised the baseline projection for WPI inflation for March 2013 to seven per cent from 6.5 per cent earlier.