Caution prevailed in the Indian bond markets throughout the week ended April 15, 2005. The markets took a breather after the carnage in the previous week, as the yield on the benchmark 2015, 7.38 per cent bond shed two basis points to close at 7 per cent.
Bond markets were edgy on the back of the government auction and concerns over interest rates. However, a rally in the US Treasuries after Fed Reserve stated its plans to go slow on the interest rate hike provided some comfort to the bond markets.
Announcement of the inflation figure for the 12 months ending April 2, 2005 hurt the market sentiments on Friday. The inflation rose to 5.26 per cent, as against previous week's 5.05 per cent. Higher prices of energy and manufactured products contributed to the rise.
The average volumes on the wholesale debt market fell marginally to Rs 2541.93 crore, as against previous week's Rs 2593.72 crore.
Oil prices eased during the week after the surge in the previous week. The prices of Brent crude witnessed volatility throughout the week before ending at $51.55 per barrel, down from last week's $54.49. Reports of OPEC's plan to raise production and increase in the US gasoline and crude inventories could be seen as the reasons for the same.
Rupee weakened to close at 43.82 per US dollar, down from previous week's close of 43.77. After a strong start to the week at 43.71 per US dollar, Rupee kept losing ground amid greenback's strength against major international currencies. At the repo/reverse repo auctions held on April 13, 2005, the RBI absorbed Rs 32,935 crore through 46 bids received at two-day reverse repo auction. It maintained the cut-off rate at 4.75 per cent. The RBI did not receive any bids at the two-day repo auction.
Call money rates remained steady during the week at 4.60-4.870 per cent, before ending at 4.75-5.00 per cent on Friday. The cumulative borrowing and lending figures (as on April 13, 2005) in the call money market stood at Rs 4294.54 crore and Rs 4294.54 crore on a weighted average rate (WAR) of 4.79 per cent and 4.79 per cent respectively.
During first half of this fiscal (April-September), the government plans to borrow Rs 83,000 crore, 20 per cent of which will be through floating rate bonds. Besides, T-bills amounting to Rs 32,500 crore would be auctioned in the first quarter (April-June) of this fiscal under the Market Stabilisation Scheme (MSS).
Outlook
Markets are likely to remain jittery during the coming week. The second government auction worth Rs 7,000 crore for the current fiscal, scheduled between April 19 and 26, 2005 continues to weigh heavily upon the market sentiments. It includes 10-14 year security for Rs 5,000 crore and 20-year and above security for Rs 2,000 crore. Markets may search for comfort in the easing crude oil prices.
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