Benchmark 10-yr bond to trade in 8.20-8.35% band
The benchmark 10-year bond is likely to trade in a band of 8.20-8.35%. In corporate bonds, the two-to-three year tenor bond may find favour.
Updated:
The benchmark 10-year bond is likely to trade in a band of 8.20-8.35%. In corporate bonds, the two-to-three year tenor bond may find favour with investors as appetite for duration improves. The upcoming monetary policy announcement will keep the market action muted next week.
Right now, we are witnessing a phase where the central bank is almost done with the rate hikes and the unwinding of rates is happening — the three-month CD rate has moved down by almost 150 basis points from a peak of 10.20%. We could see the auction cut-off yields being higher than the prior auction in similar tenors as traders build in uncertainty while bidding.
The focus will be on the progress in the US over raising the debt ceiling, the peripheral European nations looking to adopt more austere measures to lower down their debt levels and, of course, economic releases that will indicate the trend in these economies. As most of the participants believe that the central bank is likely to go for a 25-basis point increase, they will look to cover the CRR (cash reserve ratio) in the next week. Thus, call money is likely to stay on the upper band of 7.75-8.00%.
We have outflows of Rs 12,000 crore of G-sec auctions, T-bill amounts of Rs 18,000 crore (including Rs 8,000 crore of cash management bills) and the state loan sale of Rs 5,250 crore juxtaposed to inflows of Rs 8,000 crore from T-bills and Rs 2,400 crore from coupon inflows of state and government securities. This leaves us with net outflows of around Rs 25,000 crore. The CP/CD rates are likely to be higher by 15-20 basis points a head of the policy announcement. The CBLO (centralised borrowing and lending obligation) and repo markets are also likely to trade in towards the repo rate or 7.40-7.65%.
Dwijendra Srivastava HEAD OF FIXED INCOME Sundaram Mutual Fund
Right now, we are witnessing a phase where the central bank is almost done with the rate hikes and the unwinding of rates is happening — the three-month CD rate has moved down by almost 150 basis points from a peak of 10.20%. We could see the auction cut-off yields being higher than the prior auction in similar tenors as traders build in uncertainty while bidding.
The focus will be on the progress in the US over raising the debt ceiling, the peripheral European nations looking to adopt more austere measures to lower down their debt levels and, of course, economic releases that will indicate the trend in these economies. As most of the participants believe that the central bank is likely to go for a 25-basis point increase, they will look to cover the CRR (cash reserve ratio) in the next week. Thus, call money is likely to stay on the upper band of 7.75-8.00%.
We have outflows of Rs 12,000 crore of G-sec auctions, T-bill amounts of Rs 18,000 crore (including Rs 8,000 crore of cash management bills) and the state loan sale of Rs 5,250 crore juxtaposed to inflows of Rs 8,000 crore from T-bills and Rs 2,400 crore from coupon inflows of state and government securities. This leaves us with net outflows of around Rs 25,000 crore. The CP/CD rates are likely to be higher by 15-20 basis points a head of the policy announcement. The CBLO (centralised borrowing and lending obligation) and repo markets are also likely to trade in towards the repo rate or 7.40-7.65%.
Dwijendra Srivastava HEAD OF FIXED INCOME Sundaram Mutual Fund
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