The yields on government bonds are expected to shift to a lower trading range as the borrowing plan for the second half of the financial year kicks off this week. According to the new calendar, the weekly borrowings will be lower at Rs 12,000-13,000 crore as compared to heavier supply seen in the first half.
On Friday, the yields on the 10-year benchmark government bond closed at 8.15 per cent. Yields have been trading in the range of 8.15-8.25 per cent lately.
Last week, the government said it would borrow Rs 2 lakh crore in the October 2012-March 2013 period, so as to stick to the budgeted target of Rs 5.7 lakh crore for the entire fiscal. The government has borrowed Rs 3.7 lakh crore or 65 per cent of total target in the first half itself.
“Some kind of credibility was required on the government’s part to assure the markets that their goals of fiscal consolidation are still intact,” said the head of treasury of a public sector bank.
Last financial year, the government went on to announce higher borrowing twice in the course of the October-March period, thereby disrupting yields and liquidity position in the markets to a large extent.
The markets expect the rupee to further extend its rallying trend from current levels. On Friday, it closed at Rs 52.86 per dollar, its highest level in five months.
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“The rupee is seen heading into Rs 48.60-53.60 per dollar for the short term, the near-term target is Rs 52,” said Moses Harding, head-ALCO and market & research at IndusInd Bank. Thereafter, if political, economic and monetary dynamics stay positive, the rupee should extend its gains into somewhere between Rs 48.60-43.85 to the dollar, he added.
Rupee appreciated by 4.8 per cent and was the best performing currency in Asia in September 2012.