The yield on the benchmark (7.38 per cent, 2015 government security) closed at 6.67 per cent, up 12 basis points over the previous week's close. On Thursday, the yield had gone as high as 6.69 per cent. Market participants remained nervous throughout the week as the yield rose for four consecutive days.
Crude oil prices spooked the markets. Even though the winter in the northern hemisphere comes to an end, there is no respite in oil prices. Brent crude oil futures touched a record high of $56.15 per barrel during the week. Though OPEC announced that it would increase production by 2 per cent, there was little impact.
Inflation too was a cause for concern as it touched 5.30 per cent for against previous week's close of 4.95 per cent. This hike was due to higher prices of edible oils, coffee, chemicals and metals.
The rupee closed at 43.66 per US dollar, down from its five-week closing high of 43.56 on March 14, 2005. The dollar strengthened against most international currencies and saw greater demand as crude prices rose. In India, foreign fund inflow slowed down too.
Reserve Bank of India issued a Rs 400 crore, 7.20 per cent state development bonds for Maharashtra and Mizoram. Call money rates were flat during the week amid ample liquidity in the market as they closed unchanged at 4.60-4.80 per cent on Friday as compared to previous week's close. RBI auctioned 364-day amounting to Rs 2000 crore, of which Rs 1000 crore was auctioned under the regular auction calendar and Rs 1000 crore under Market Stablisation Scheme. It also auctioned 91-day T-bills amounting to Rs 2000 crore, which included Rs 500 crore under Market Stabilisation Scheme.
Oulook
The bond market is hoping that international oil prices ease so that local factors will start making an impact. Otherwise, bond participants are waiting for inflation to not rise too much and yields to drop slightly as they close the books on March 31.
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