Bond markets firmed up during the week ended June 24, 2005. Government announced a hike in the retail prices of petrol and diesel by Rs 2.50 and Rs 2 per litre, respectively, which ended the uncertainty. This, coupled with a surge in the US treasuries during the week provided buoyancy to the bond markets.
The yield on the popularly traded 2015, 7.38 per cent GOI bond ended at 6.87 per cent, down nine basis points from previous Friday's close of 6.96 per cent. Bond markets surged earlier in the week, after the government announced hike in fuel prices. A surge in the US treasuries also provided positive triggers to the market. However, during mid-week, rising crude oil prices and the government auction worth Rs 5,000 crore restricted the gains. Markets slipped a bit on Friday to loose some of the gains made earlier in the week. Profit booking by the traders and expectation of a further hike of 25 basis points in the interest rates by Federal Reserve in the coming week pulled the market down.
Inflation reversed its downward trend. For the week ended June 11, 2005, inflation stood at 4.33 per cent, as compared to 4.22 per cent for the previous week. The rise came on the back of higher prices of eggs, fruit and vegetables.
Oil prices, which surged to touch $60 per barrel mark during the week, remained a cause of concern for the markets. The surge came even though OPEC is considering another possible hike in output. OPEC had earlier increased its production quotas by 500,000 barrels a day. However, there was no respite in the oil prices over concerns that refiners may not be able to keep up with the growing demand, coupled with fears of disruptions in supply due to unrest in Nigeria.
Rupee ended almost flat at 43.56 per US dollar, as against previous week's close of 43.55. Rupee gained strength earlier in the week on the back of strong foreign inflows. However, the gains were cut short as euro slipped against the dollar. Also, high crude oil prices and the expected hike in the US interest rates weighed heavily upon the Indian currency.
Call rates remained in the range of 4.95-5.10 per cent for majority of the week. However, heavy demand that came late on Friday led to a spurt in the call rates, which closed higher at 5-5.20 per cent on Friday.
At the repos/ reverse repo auctions held on June 23, 2005, the RBI absorbed Rs 11,550 crore through 31 bids received at one-day reverse repo auction. It maintained the cut-off rate at 5 per cent. At the one-day repo auction, the RBI did not receive any bids.
As on June 23, 2005, the cumulative borrowing and lending figures in the call money market stood at Rs 13,675.09 crore and Rs 13,675.09 crore on a weighted average rate of 5.04 per cent and 5.03 per cent respectively.
Outlook
After a rally, the bond markets witnessed profit booking towards the end of the week. Going further, traders are expected to remain cautious in anticipation of a hike in interest rates by the US Federal Reserve in the coming week. High crude oil prices are likely to exert further pressure.
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.
