Yields on G-Secs likely to head south this week: Experts

MUMBAI: Yield on government securities are expected to ease in the coming week and will hover in the range of 8.30 to 8.35 per cent for the 10-year benchmark bonds, treasury officials of various banks have said.

"Yields are likely to be in the range of 8.30-8.35 per cent for the 10-year benchmark bonds this week as liquidity issues are being addressed by the central bank through open market operations (OMOs)," Indian Overseas Bank general manager for treasury T S Srinivasan told PTI.

On Friday, yields on the 10-year benchmark instrument bond closed at 8.36 per cent, or one basis points, lower than a week before.

OMO, which is conducted by RBI to infuse liquidity in the system through buying back government securities, has been frequently used by RBI for easing pressure on liquidity front in the last one month.

The central bank has already infused around Rs 33,300 crore into the system through OMOs in the last one month and is likely to infuse more in the future.

Srinivasan further said the government spending would accelerate from January as the budget nears, making the liquidity situation comfortable.

It is usually seen that the departmental spending by various government agencies speed up from January onwards to expend the allocated money in the previous budget. Srinivasan also pointed out that the reports suggesting alternative way of borrowing by the government would support this trend.

"There are reports suggesting that the government may pledge its holding in some of the private companies to borrow around Rs 50,000 crore from the market. If that happens, pressure on yield will further ease," he said.

Earlier, market participants have anticipated that if the government borrowing increases, then yield rates will harden due to oversupply.

Another treasury officials also echoed similar sentiment about yield on government bonds.

"It should flatten out as the central bank is infusing liquidity through open market operation. Also, the regulations allowing higher FII limit and some of the other measures should help in easing of the yields," Corporation Bank general manager for treasury P Rajaram Karanth said, adding yields on the 10-year G-Secs will be around 8.33 per cent next week.

He also said liquidity that has gone out of the system during advance tax payouts, would come back, which would ease out liquidity condition in the system going ahead.