The bond markets continued to be subdued for the second consecutive week as the yield on the 10-year benchmark bond (GOI 2015, 7.38 per cent) crept by 2 basis points over last week to 6.50 per cent. The markets remained cautious as operators refrained from taking positions ahead of the Budget. The volumes on the wholesale debt market remained low for the entire week. With the Budget just around the corner, average volumes for the week fell by 20.43 per cent as against the previous week.
The sale of 7.17 per cent State Development Loan, worth Rs 6,300 crore with a maturity of 12 years by 16 state governments also contributed to the nervousness of the market.
Government bonds lost marginally on Monday as the popularly traded 7.38 per cent 2015 bond closed at 6.50 per cent. A major announcement came on Monday from ICICI Bank which would raise up to Rs 800 crore by way of public issue of bonds. On Tuesday and Wednesday, the bond markets stayed weak amid concerns over rising crude oil prices, before ending flat with the benchmark bond yield at 6.50 per cent. Bonds markets were quite weary ahead of the announcement of inflation figures and the Economic Survey on Thursday. Though inflation remaining static at 5.01 per cent for the week ended February 12, 2005 brought some respite, an estimated 6.9 per cent GDP growth rate 2004-05 as per the economic survey failed to lift the sentiment on Friday.
The rupee traded firm against the dollar throughout the week as a result of the greenback's weakness against the euro and other global currencies. The rupee touched its weekly high of 43.69 on Thursday before finally ending the week at 43.73 on Friday, due to RBI's intervention that capped the early gains.
Oil prices also continued their upward trend during the week. Sweeping cold wave across US and Europe pushed the crude prices upwards.
Outlook
Though the government seems to have a positive outlook over inflation for the coming year, the recent surge in the crude oil prices is likely to hurt sentiment in the short run. However, the biggest cue for the market is just around the corner. The bonds markets will take a direction as the Finance Minister will unveil Budget 2005 on Monday.
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