September 24, 2013 / 15:47 IST
The bond markets saw some relief on Tuesday after closing over 25 bps higher than Monday that saw Rs 4,000 crore of Rs 15,000 crore auction devolved as well. Focusing on today, the 10-year yield softened to levels of 8.76 percent intraday versus the closing of 8.85 percent on Monday.
The relief was on the back of the
H2FY14 borrowing calendar that was announced post market hours on Monday and was in line with the expectations.
The figure for the second half was at Rs 2.35 lakh crore versus the Rs 2.85 lakh crore or above that the street feared. This figure indicates the government is steadfast in maintaining the fiscal deficit target at 4.8 percent for FY14 and if there is a shortfall in revenue (via taxes/divestment) the government will cut non-planned expenditure but is unlikely to borrow more.
The other reason for softening today could also be due to the hope from RBI, which will conduct open market operations. In any case, the bonds are still elevated, closed at 8.19 percent on Thursday and 8.58 percent on Friday and are currently cooled off from the 8.85 percent closing on Monday, but still high and for the near-term experts expect it to be in the range of 8.5-9 percent. This is because there is a possibility of further repo rate hike to control inflation which has an upside risk since diesel under-recoveries are currently running at Rs 12- 13.
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