The yield on government securities may move up, as supply of bonds from Centre and states remains high. The G-Sec market sentiment was weak on Thursday, tracking apprehensions over the second half borrowing programme. The benchmark 10-year paper 6.90 per cent 2019 paper closed at Rs 97.75, implying a yield of 7.22 per cent.
Dealers said large borrowings by the government to fund the fiscal stimulus in the first half kept the yield on bonds up. While borrowing in the second half at Rs 1,23,000 crore can be managed on the back of abundant liquidity, states government may step up fund raising.
The borrowing calendar indicates that the government will sell debt in the range of Rs 9,000 crore to Rs 10,000 crore a week until February 2010. Besides huge supply, the fact that the RBI has not yet reached a decision on the HTM hike issue has put pressure on Government bond prices. RBI will conduct an auction on October 9 for bonds worth Rs 9,000 crore. The securities offered are 7.02 per cent 2016 paper for Rs 3,000 cr, 6.90 per cent 2019 for Rs 4,000 cr and 8.28 per cent GOI 2032 for Rs 3,000 cr. Prior to auction for central government bonds, 11 state governments, including Andhra Pradesh, Bihar and Maharashtra will raise about Rs 9,500 crore via a bond auction on October 6.
Call rates
The interest rates in the inter-bank market are expected to remain range-bound on ample liquidity in the system. The liquidity situation was fairly stable and the overnight rates remained soft. The money which went out of the system for paying the second instalment of advance tax will begin to come back in the system in the form of government expenditure. On Thursday, the overnight call rate hovered between 2.25 per cent to 3.30 per cent. The RBI absorbed Rs 80,265 crore at reverse repo window.
Rupee
The rupee may remain stable against the dollar on the back of substantial capital flows into stock markets. The rupee closed at Rs 47.76 against the greenback on Thursday. Dealers said continued FII inflows and the dollar’s fall against Asian currencies like Philippine peso and Indonesian rupiah impacted the rupee value. The dollar demand from oil and gold firms, and other importers limited the rise in rupee during this week.
