The Street expects government bond yields to fall this week on the back of contraction in index of industrial production (IIP), raising hopes that the Reserve Bank of India (RBI) might reverse its interest rate cycle. Experts peg the wholesale price index numbers for July at five per cent, up from June's 4.86 per cent.
According to economists, this marginal rise leaves room for RBI to cut rates further when the rupee stabilises against the dollar. The yield on the 10-year benchmark government bond 7.16 per cent 2023 ended at 8.13 per cent on Thursday, compared with the previous close of 8.14 per cent. The market was closed on Friday on account of Eid-ul-Fitr. The consumer price index (CPI) inflation data for July is to be released along with the IIP numbers. June CPI rose to 9.87 per cent, after slowing for three straight months. For May, it was at 9.31 per cent. The Street is concerned that it could touch a double digit.
In May, industrial production had contracted 1.6 per cent, an 11-month low. Government bond dealers expect the yield on the 10-year benchmark bond to trade in the range of 8.05-8.25 per cent. The Street expects the rupee to strengthen this week with the government and RBI likely to take more measures to arrest volatility in the rupee against the dollar. On Thursday, RBI had decided to tighten liquidity further by auctioning cash management bills amounting to Rs 22,000 crore every week. As liquidity will get squeezed further, the Fixed Income Money Market and Derivatives Association of India (FIMMDA) decided to remove the price bands for trading sessions on Monday and Tuesday. The rupee ended at 60.86 on Thursday, compared to the previous close of 61.30. Currency dealers expect the rupee to trade in the range of 60.50-61.50 this week.
According to economists, this marginal rise leaves room for RBI to cut rates further when the rupee stabilises against the dollar. The yield on the 10-year benchmark government bond 7.16 per cent 2023 ended at 8.13 per cent on Thursday, compared with the previous close of 8.14 per cent. The market was closed on Friday on account of Eid-ul-Fitr. The consumer price index (CPI) inflation data for July is to be released along with the IIP numbers. June CPI rose to 9.87 per cent, after slowing for three straight months. For May, it was at 9.31 per cent. The Street is concerned that it could touch a double digit.
In May, industrial production had contracted 1.6 per cent, an 11-month low. Government bond dealers expect the yield on the 10-year benchmark bond to trade in the range of 8.05-8.25 per cent. The Street expects the rupee to strengthen this week with the government and RBI likely to take more measures to arrest volatility in the rupee against the dollar. On Thursday, RBI had decided to tighten liquidity further by auctioning cash management bills amounting to Rs 22,000 crore every week. As liquidity will get squeezed further, the Fixed Income Money Market and Derivatives Association of India (FIMMDA) decided to remove the price bands for trading sessions on Monday and Tuesday. The rupee ended at 60.86 on Thursday, compared to the previous close of 61.30. Currency dealers expect the rupee to trade in the range of 60.50-61.50 this week.