After the initial surge in the yields, the bond markets ended almost flat in the week ended July 15, 2005. Expectations of a hike in interest rates in the forthcoming monetory policy review, coupled with the gilt auction to be held in the coming week kept the traders on the sidelines, as the volumes remained thin.
The yield on the benchmark 2015 GOI 7.38 per cent bond ended at 7.17 per cent, one basis point down from its previous Friday's close of 7.18 per cent. Earlier, bond markets started the week on a depressing note as the yield on the 7.38 per cent 2015 GOI bond surged to 7.24 per cent. Gilt auction worth Rs 5,000 crore scheduled betweem July 12-18 induced the traders to cut positions to make some room. However, the markets remained dull, before ending flat on the next two days. Uncertainity over the gilt auction and interest rates loomed large. The last two days brought some respite to the traders as the markets posed a recovery. The announcement of gilt auction 10.25 per cent 2021 GOI bond worth Rs 5,000 crore to be held on July 18, 2005 late on Thursday put an end to the uncertainity. Along with that, improved liquidity and softening crude oil prices helped the markets end the week on a positive note on Friday.
The inflation for the week ended July 2, 2005 stood at 4.09 per cent, down from previous week's 4.14 per cent. The inflation declined to its 22-month low primarily on account of cheaper food products.
Crude oil prices registered a decline during the week, as some of the fears related to the possibility of refineries in the Gulf of Mexico being hit by hurricanes were alleviated. Brent crude closed at $57.42 per barrel, as against previous week's close of $59.7 per barrel.
The rupee recovered from the London blasts blues. The rupee had slipped to end the previous week quoting 43.63 per US dollar. Strong FII inflows propelled the Indian currency to end the week stronger at 43.52 per US dollar.
Call rates remained at higher levels in the initial part of the week on the back of higher demand for funds. However, liquidity improved later in the week and the call rates dropped to end at 4.95-5.10 per cent on Friday.
As on July 15, 2005, the cumulative borrowing and lending figures in the call money market stood at Rs 682.24 crore and Rs 682.24 crore on a weighted average rate of 5.06 per cent and 5.06 per cent, respectively.
Outlook
The forthcoming auction worth Rs 5,000 crore scheduled to be held on July 18, 2005, may induce the traders to remain on the sidelines. However, the next big trigger for the markets will be the forthcomnig monetory policy review. The expectations of a hike in the interest rates is likely to keep the sentiments cautious. In all, we may see another dull week, with trading volumes likely to remain low.
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