After a splendid performance in the previous week, bond markets continued to rally during the week ended July 13, 2007. The yield on the benchmark 7.49 per cent GOI 2017 bond shed another 7 basis points before the ending the week 7.94 per cent.
Ample liquidity in the system propelled the markets on the first trading of the week itself and the yield on the 10-year benchmark paper touched a low of 7.86 per cent intra-day on Monday. However, the markets subsequently pared part of the gains as the traders remained apprehensive about any actions that the central bank might take to drain the liquidity, ahead of the quarterly policy review on July 31. As a result, some of the traders refrained from building significant positions. Higher oil prices, which are touching $72 per barrel, also played upon the sentiments. Nevertheless, bond markets yet again ended the week with gains.
Inflation, though, continued to rise for second week in a row. For the 12-month period ending June 30, 2007, inflation inched up to 4.27 per cent, as against previous week's 4.13 per cent, mainly on account of an increase in the prices of food articles.
After the trading hours on Friday, the central bank announced that government securities worth Rs 18,000 crore will be auctioned in the coming week. Given the liquidity conditions, the auctions should go through comfortably.
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