Bonds continued to reel under the pressure of the CRR hike which took effect on November 16. While the absence of an MSS auction announcement on Monday bolstered sentiment, optimism was short lived as liquidity continued to be under pressure. As a result traders shied away from taking big positions. Consequently, the yield on the 10-year benchmark, 7.99 per cent GOI 2017 bond remained unchanged at 7.87 per cent from its previous close. On Tuesday, sentiment was helped by a rally in US treasuries that forestalled a selling pressure. By Wednesday, fears of tightening overtook the market as tight liquidity conditions left Rs 2,500 crore of Rs 4,000 crore treasury bills unsold. Consequently the yield on the benchmark bond edged up by one basis point. By Thursday, the liquidity situation improved, with the central bank infusing money into the system over Monday - Wednesday. Call rates also eased off to 5 - 5.25 per cent, after trading in the 7.70 - 8 per cent range.
However, again on Friday there appeared a cash squeeze pushing call rates to 6 - 6.25 per cent. This took the attention away from lower than expected inflation at 3.01 per cent as of November 10, lower than 3.11 per cent a week earlier. The yield on the benchmark bond finally closed one basis point higher than its previous week's close.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outlook
The liquidity condition will not ease till the next month when advance corporate tax payments will fall due. Until then trading will remain weak in the debt market. On Monday, settlement of bond auctions will tighten liquidity yet again and exert an upward pressure on yields.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
