Yields could move on either side of 8.50 per cent

By: Ramesh Krishnan

Head, Treasury

Dhanlaxmi Bank

Traders bid aggressively for the actively traded 2024 maturity stock for Rs 7,000 crore on April 20, but to their dismay saw the stock suffering 0.54% value erosion by close of trading day. This portends to tough times for the Reserve Bank of India in managing the government's borrowing programme.

The continuous supply of bonds slated week after week will weigh heavily in the minds of investors before considering any 'value buying'. The increase in arbitrage benefit between money market and LAF borrowings could also have contributed to the larger reliance on LAF borrowings at Rs 1.08 lakh crore on last Friday. Will this trigger an OMO? May be not! Therefore the 10-year yield could move on either side of 8.50%, in the absence of any directional signals from RBI or the government.

CD issuers will aim for sub 9.00% rates for three-month tenor. Market will keenly watch the alignment of the corporate bond yield curve post rate cuts and the large new issuances lined up. The swap rates for short-tenors are expected to hold, while the longer-tenor ones could track bond yields movement. Call and CBLO must be trading close to reverse repo rate.