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Yields seen falling further, rupee may appreciate

Government bond yields would fall further this week, as the dovish tone of the Reserve Bank of India (RBI)’s monetary policy review shall continue to boost market sentiment.

“The yield on the 10-year bond might near 8.40 per cent this week,” said a fixed income fund manager.

The yield on the 10-year benchmark government bond ended at 8.51 per cent, a level previously seen on January 13, compared with Thursday’s close of 8.53 per cent.

The auction of government bonds worth Rs 16,000 crore sailed smoothly on Friday. Besides, according to the latest data from the National Securities Depository Limited, foreign investors have exhausted over 80 per cent of the available limit of $ 20 billion in government bonds. The rupee on the other hand, might appreciate further as foreign in-flows are seen continuing in domestic markets. The rupee ended at 59.18 to a dollar on Friday, compared with the previous close of 59.33.

Due to inflows in the domestic market which include primarily equities, the rupee is seen appreciating further. According to Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai, the rupee might trade in the range of 59-59.50 a dollar this week.

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