Ten-year bond yield to range between 7.5% and 7.65%

S Srinivasaraghavan, VP, head-treasury, IDBI Gilts

The sentiment in the G-Sec market over the coming week would be clouded by concerns over the release of inflation numbers for May 2010 and apprehensions over tightness in liquidity, following further outflows towards advance tax.

Over the coming week too, we expect the liquidity to remain in a tight mode due to outflows towards advance tax of Rs 25,000-Rs 30,000 crore. We expect this tightness to be short term and temporary in nature. We expect the government having around Rs 50,000-crore surplus in its kitty to gradually start spending and this should soothe the sentiments of the G-Sec market from the fourth week of June.

Bond movements could also depend on global developments. The European crisis is still looming large. Hence, the G-sec market sentiment could improve from the present levels. Over the coming week, we expect the benchmark 10-year yield to hover in the range of 7.50%-7.65%.