Sovereign bonds inched up further from last week, with attention centered on medium and long-term bonds. After staying range bound for some time, this week, yield on the 10-year benchmark GOI (2012 7.40%) touched its all time low of 7.08 per cent – down 0.04 per cent over the last week.
RBI re-issued the scheduled twin government bonds this week. The first auction of Rs 4000 crore 2013 7.27% bond was issued at a cut-off price of Rs 100.93, yielding a return of 7.2 per cent. The other auction worth Rs 3000 crore 2032 7.95% bond was made at a cut off price of Rs 100.72, which works out to a yield of 7.89 per cent. Both auctions were over subscribed, though the cut-off price was higher than the market expectation.
Corporate bonds also moved in tandem with government securities. The 5-year benchmark Hindalco paper fell 9-10 basis points over the week to reach below 7 per cent.
Though liquidity was initially high, the call rate remained static moving in the 5.70-5.75 per cent range on Monday. There was also a lot of action at the repo market as RBI received aggressive bids. Though after the Rs 7000 crore outflow on account of auction, the call rates firmed up to 5.8-5.9 per cent level.
On the economy front, industrial output grew at 5.7 per cent in August and was higher then expected. The tax receipts for the first half was also healthy and rose on the back of corporate recovery, at the rate of 17 per cent. Exports also picked up as first five months of the fiscal have seen a healthy increase of 13.37 per cent. Backed by these high exports and other inflows, rupee touched its eight and half month high of 48.31 on Wednesday. The rupee ended at 48.33 on Friday, three paise above the previous week's close.
Outlook:
A 4000 crore auction using multiple price method is expected by the end of the week. Liquidity is, however, expected to remain comfortable. On account of new call rate regulations, repo auctions may continue to receive aggressive bids.
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.
