Bond yields to touch 8.45-8.55%

Arvind Konar

With the government overshooting the borrowing programme of the second half of the current fiscal by a wide margin, market sentiment will remain negative. The continuous supply of bonds every week along with tight liquidity conditions and hawkish monetary stance of the RBI due to stubborn and sticky inflation numbers does not augur well for the bond market in the current quarter.

With July-September advance tax numbers lower than expected and likelihood of a slow growth and major shortfall in divestment proceeds, the market will remain fearful of fiscal slippages. Ten-year benchmark Gsec — 7.80% 2021 may move in the range of 8.45-8.55%, during the week.

We may see some value buying on the upper range of the band. Long-tenure corporate bond yields will have an upward bias with 10-year ‘AAA’-rated PSU bonds may trade in the range of 9.55-9.65% in this week. Threeyear, and five-year corporate bonds may trade in the range of 9.55-9.65%.

The three-month CDs may trade in the range of 9.25-9.45% while top-rated three-month CPs may trade in the range of 9.75-9.90%. The one-year CDs may trade in the range of 9.60-9.75%.

(The author is Head-Fixed Income, Almondz Global Securities)