Bond markets closed flat in the week ended March 24, 2005. The yield on the benchmark 7.38 per cent, 2015 government bond ended at 6.68 per cent, up one basis point from the previous week's close of 6.67 per cent.
The bond markets remained weak for the first three days of the week. The benchmark bond's closing price of Rs 104.84 on Wednesday was the lowest since January 27, 2005, when it had closed at Rs 104.70. However, markets were able to recover from the losses made earlier in the week on Thursday, thus ending on a positive note.
Thursday was particularly a good day for the bond markets, as positive news on many counts helped turn around the sentiment. Finance Minister's comments that interest rates are unlikely to rise in the next six months generated a broad buying interest in the markets. Inflation eased to 5.23 per cent for the week ended March 12, 2005 as against the previous week's figure of 5.30 per cent.
The nervousness of the market was evident from the low volumes recorded on the wholesale debt markets, which continued with their falling trend for the fourth consecutive week.
The average volumes shrunk to Rs 1666.85 crore, though Thursday brought some respite in this respect, with the volumes rising to Rs 2680.45 crore. A nationwide strike of the PSU banks also contributed to the low volumes on Tuesday, when the volumes were the lowest since November 13, 2004.
Crude oil prices, that have been a cause of concern for a long time, eased during the week. After touching a weekly high of $55.69 per barrel on Monday, the oil prices came down to $53.34 per barrel by the end of the week.
Rupee traded week against the US dollar throughout the week. A fed rate hike enabled the dollar to firm up against all major international currencies. Rupee ended the week at 43.75 per US dollar, as against previous week's close of 43.65.
Call money rates hovered between 4.60-4.90 per cent. At the repos/reverse repo auctions held on Thursday, Rs 10,900 crore were absorbed by the RBI through 19 bids received at four-day reverse repo auction. The cut-off rate was 4.75 per cent. RBI did not receive any bids at the one-day repo auction.
The government's borrowing plan for the next fiscal will decide the market direction in days to come. Besides, Finance Minister's comments ruling out the increase in the interest rates for the next six months is likely to have a positive effect on the bond market. However, volatility in the crude oil prices, coupled with strengthening dollar can influence the market sentiments in the short run.