The yield on the benchmark 10-year government securities is likely to be rangebound this week as the market will wait for cues from the mid-quarter monetary policy review slated for December 18, say treasury officials.

However, they say the yield is likely to soften in the future. “The 10-year G-sec is likely to be rangebound in the near future and will take its cue from the monetary policy action in the mid-quarter review by the central bank on December 18,” Indian Overseas Bank General Manager for Treasury B.S. Keshava Murthy told PTI.

Yield is a figure that shows the return investors get on a bond instrument.

Significantly, according to him, the government decision of not to have any additional borrowing in the current fiscal will not have any major impact on yield as the market has already factored in the same.

On Friday, Finance Minister P. Chidambaram said the government will stick to its budgeted market borrowing target of Rs 5.7 lakh crore during the current fiscal and ruled out any more fresh borrowing.

In the first half, the fiscal deficit rose to Rs 3.37 lakh crore or 65.6 per cent of the budget estimate.

“We don’t think at this moment we need to borrow anything more than what is indicated,” the minister said after seeking parliamentary nod for additional Rs 30,800 crore of supplementary grants this fiscal.

However, Murthy says the recent RBI announcement to conduct more open market operations will have some easing impact on the yield.

The RBI said it will conduct an OMO of Rs 12,000 crore on December 11 to tide over the liquidity deficit for the second time after doing one worth Rs 12,000 crore on December 4.

But an official from Kotak MF believes that the 10-year benchmark would see softening going ahead.

“The 10-year G-Sec is trading around 8.16 per cent as of now and we hope that the yield will move in the lower end,” senior vice-president and fixed income and products head Lakshmi Iyer said.

(This article was published on December 9, 2012)
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