Pennywise:10-year yield may move in a band of 8.80-8.90%: Roy Paul, Deputy General Manager, Treasury Deptartment, Federal BanK

With the possibility of an increase in market borrowing programme looming large, expect the benchmark yield to remain elevated in the near term. Expect 10-year benchmark to be in the 8.80-8.90% range. Large OMO operations by RBI to sterilise the negative liquidity on account of forex intervention may bring in some surprises.

Positive developments on the inflation front, coupled with moderation in growth, may prompt RBI to take a pause on the rate hike in the policy review on December 16. Such a move is likely to push the 10-year yield down to 8.60% level, though supply-side worries persist. The outcome of the auction of the enhanced FII limit on G-sec will be keenly watched for positive cues.

Liquidity will continue to remain tight. At the same time, one can expect call and CBLO rates to hover around the repo level of 8.50%, as we are entering the last lap of the current fortnight wherein CRR product-related borrowing will be less. The large repo figures these days is in fact not a true reflection of the state of liquidity in the system as a part of it is on account of the arbitrage opportunities available in the market viz repo v/s call/CBLO, repo v/s short-term CD/ CP, etc. With the quarter end not far off, banks will be keen to issue CDs to shore up the balance sheet numbers.

Deputy General Manager, Treasury Deptartment, Federal BanK