The yield on the 10-year benchmark (GOI 2015, 7.38 per cent) was at the same level as previous week, closing at 6.74 per cent. There was little interest in the trader community as the markets lacked direction. The inflation rate was better than expected and the market awaits the forthcoming auction in the first week of February.
On Monday, the yield went up by one basis point, in a generally directionless market. The liquidity was comfortable which was a saving grace. On Tuesday, volumes improved marginally but traders were in a holiday mood due to Republic Day on Wednesday. The yield increased by a basis point. Traders did not object to a finance ministry official's statement that the government would stick to its borrowing schedule in February. On Thursday, debt markets saw no change in the yield. Better-than-expected inflation numbers resulted in a 2 basis point fall in the yields on Friday. Inflation fell to 5.42 per cent over previous week compared to the market consensus of 5.5 per cent.
The markets are spooked by the rise in crude oil prices. In the previous fortnight, Brent crude prices went up by $2.6 and last week saw another 27 cents rise to $45.97. The severe winter in the northern hemisphere has resulted in higher fuel prices.
Otherwise traders were awaiting the forthcoming auction worth Rs 5,000 crore in the first week of February. Trading volumes decreased by 35 per cent last week over previous week. Liquidity was comfortable with call rates hovering in the 4.6-4.8 per cent range. The rupee gained 8 paise against the dollar with the dollar ending at Rs 43.72.
Outlook:
The announcement of the inflation rate cheered the markets, but beyond that the market does not have anything to look forward to. Oil prices are likely to stay high. On home territory, the market will be driven by expectations of the Union Budget and the auction betweent February 1-8.
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.
