The bond market began the week on a firm note with prices gaining about 20 paise by the end of trade. The whole of last week, bond prices had slipped due to fears of a possible rate hike by the central bank, a likely increase in domestic fuel prices and the auction of government papers scheduled for Tuesday that would drain some of the liquidity. But on Monday bond prices opened higher due to the fall in US yields to 5 per cent and the overall mood in the market was positive, said a dealer with a private bank. "Generally there was a decline in yields on Monday. The US payroll data indicated that there could be a pause in the rate hike by the Federal Reserve. So, it is possible the hike from 5 to 5.25 per cent may not happen," the dealer said.The 7.59 per cent 2016 10-year benchmark paper opened at Rs 99.7 (7.63 per cent YTM) and closed at Rs 99.65 (7.65 per cent YTM), up from Friday's close of Rs 99.46 (7.67 per cent YTM). The 9.39 per cent - 5-year-2011 paper opened at Rs 108.91 (7.26 per cent YTM) and closed at Rs 108.72 (7.30 per cent YTM). Dealers said the cut-off for the 9.39 5-year paper in Tuesday's auction is likely to be 7.33-7.35 per cent and for the new 30 paper it is likely to be 8.25 per cent. Liquidity was very comfortable at over Rs 70,000 crore. Even with the auction mopping up Rs 10,000 crore and a likely outflow of Rs 20,000-25,000 crore through advance tax, liquidity would remain comfortable, the dealer said.
