The mood in the bond market was again subdued with tight cash conditions curtailing demand in the market. On Monday, the yield on the 10 year benchmark 7.99 per cent GOI 2017 bond remained unchanged at 7.90 per cent. However there was optimism in the market as traders expected the cash condition to improve owing to the redemption of treasury bills amounting to Rs 3500-4000 crore. Further data revealed that the central bank had been buying bonds from the secondary market in order to infuse money into the system. This in turn led to a downward pressure on yields and the yield on the benchmark bond fell by one basis point on Tuesday and Wednesday. On Thursday, the last trading day for the week, the yield on the benchmark bond dipped to 7.87 per cent, this time on the back of lower inflation data. Inflation for the year ending December 8 stood at 3.65 per cent compared to 3.75 per cent from a week before.
Call rates remained high through the week and banks that had excess SLR positions preferred to borrow from the central bank.
Advance tax outflows that exasperated an already cash tight market are expected to return to the system on the back of increased government spending, but only in the New Year. But in the absence of a positive push the market will remain range bound over the forthcoming week.