VR Logo

Calm on Bond Street

Curtailed trading week and concern over advance tax outflows refrain traders from building huge positions

Bond markets remained dull during the week ended March 17, in the wake of advance tax outflows. The yield on the popularly-traded 8.07 per cent GOI 2017 bond ended at 7.39 per cent, unchanged from previous week's close.

It was a curtailed trading week as the bond markets remained closed on Wednesday on account of Holi. Markets started on a cautious note as the traders were concerned about the advance tax outflows. The advance tax payments are expected to be around Rs 25,000-30,000 crore. The situation was much the same throughout the week as traders refrained from building huge positions. However, some buying was witnessed on Thursday which eased the yields a bit. Market participants are also expecting the announcement of the borrowing schedule for the next financial year soon.

For the week ended March 4, inflation fell to 4.02 per cent, as compared to its previous week's 4.29 per cent. The decline came on the back of cheaper food items.

The rupee ended the week stronger against the US dollar. The Indian currency ended weaker on Monday amid dollar buying by public sector banks. However, strong foreign inflows reversed the trend in the following days. However, intervention by the RBI saw the rupee lose some of the gains on Friday as it ended at 44.42 per US dollar.

Call rates declined a bit to end at 6-6.25 per cent against previous week's close of 6.20-6.30 per cent. Though liquidity improved marginally this week, but the situation can change soon as the impact of the tax outflows, that started late this week, is expected to be felt in the coming week.

Outlook
Markets are expected to start the next week on a cautious note, as the traders will gauge the impact of tax outflows on the liquidity conditions. They are also looking forward to the announcement of the borrowing schedule for 2006-07. The government is expected to borrow Rs 1.53 trillion in the coming financial year.