Govt to raise Rs 34,000 cr through bonds

MUMBAI: Government bonds rose for the fifth straight day amidst speculation that the Centre may not overshoot its borrowings targets for this year.

The government has said that it will sell Rs 34,000 cr of bonds in July, compared to the Rs 60,000 cr it sold in June.
The yield on the most traded debt fell to a three-week low of 6.47% as against 6.50% at close on Friday. The ten-year bond only saw trades worth Rs 65 cr.

Banks increased government bond investments by $3.5 billion in the two weeks ended June 5 to $12.6 trillion. India���s long-dated bonds may rally as lenders increase purchases to meet rules that require them to invest at least 24 percent of their deposits in government debt called the SLR ratio, analysts at Goldman Sachs said.

"The government not announcing any auction as yet has improved the outlook on bonds. The budget will decide the next direction that bonds take," said SS raghavan , head of treasury at IDBI Gilts.

The government will announce its final budget for 2009/10 on July 6, and the market is concerned it would increase the scheduled market borrowing of Rs 3.62 lakh cr. The central bank will auction Rs 3,000 cr of treasury bills on Wednesday.
The rupee ended at 48.11, just five paisa above Wednesday close and the highest level in more than a week on speculation that

importers are in the market, buying dollars ahead of the month end.

Importers buy foreign exchange to settle their month-end bills. Oil, the country���s biggest import lso rose above $69 a barrel on Monday, leading to speculation that puchases of oil companies would also go up. This capped rupee rise despite upswing in stocks.

Before the budget, the two data keenly watched will be May trade figures on July 1 in New Delhi and Economic Survey on July 2.