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The yield on the benchmark 8.07 per cent GOI 2017 bond ended at 7.38 per cent, down one basis point over the week. The RBI announced the much-awaited borrowing calendar on Friday

Bond markets remained range-bound during the week ended March 24, 2006. The yield on the benchmark 8.07 per cent GOI 2017 bond ended at 7.38 per cent, down one basis point from last Friday's close of 7.39 per cent.

After the close of markets on Friday, the central bank announced the much-awaited borrowing calendar for the first half of the next financial year. As per the calendar, the government has scheduled borrowings to raise a total of Rs 89,000 crore during the six month period of April-September 2006, of which Rs 18,000 crore will be raised in the month of April. The borrowing for the first half is said to be largely in line with the market expectations.

In another significant development, The Finance Minister commented that the RBI would announce steps on rupee convertibility soon.

Bond markets started off the week on a positive note as the yield on the popularly traded 8.07 per cent GOI 2017 bond shed one basis point to end at 7.38 per cent. There was some optimism in the markets as the traders expected the liquidity to improve in the coming days on the back of an increase in the government spending. But thereafter, the markets remained largely range-bound. The bonds gained some ground in the early trades on Tuesday but gave up the gains later in the day as the market participants resorted to profit booking. While the expectations of improved liquidity comforted the traders, but most of them preferred to stay on the sidelines ahead of the announcement of the government's borrowing schedule for the next year. Bond markets witnessed volatility on Friday. The yield on 8.07 per cent GOI 2017 bond eased to 7.36 per cent, but the concerns related to the announcement of borrowing schedule, coupled with higher than expected inflation, pushed it up to 7.38 per cent by the end of the trading. Inflation, for the week ended March 11, 2006 rose to 4.28 per cent, as against previous week's 4.02 per cent. Costlier manufactured products and higher prices of some of the food items caused the inflation to register a rise.

Rupee weakened against the US Dollar to end at 44.66 per US dollar on Friday, as against last Friday's close of 44.42. Strong FII inflows helped the Indian currency gain strength earlier in the week. The Finance Minister commented that the RBI would take steps to enhance the convertibility of the Indian currency. In fact, the central bank announced that a six-member committee would chalk out a plan by July 31 to move towards higher convertibility. However, dollar buying by the state-owned banks to absorb the robust FII inflows, coupled with the greenback's strength against other major currencies put pressure on the rupee as it ended weaker.

Call rates rose to 7-7.25 per cent on Monday but eased off over the week as the liquidity condition showed signs of improvement. The call rates ended at 6.50-6.70 per cent on Friday.

Outlook for the bond markets is optimistic for the coming week. The uncertainty over the borrowing calendar, which has largely been in line with the market expectations, has subsided. Moreover, we may also see improved liquidity in the system on the back of higher government spending.