Range bound trade; 10 year benchmark bond closes the week at 7.95 :Edelweiss

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Range bound trade; 10 year benchmark bond closes the week at 7.95%
Government securities
 Sovereign bonds ended steady today as most participants refrained from taking
any big positions before the release of the wholesale price inflation data scheduled
for Monday. Yields did not react significantly to the industrial growth data (3.70%
in Jan-11) since the inflation number for Feb-11 will provide further clarity on the
pace of the rate hike from the central bank. However the sentiment in the market
has been upbeat over the fortnight owing to the absence of fresh supply of bonds,
the auction of unutilized limits for FIIs and lower weekly food inflation data.
Non-SLR market
 Short terms rates eased further due to the improvement in the liquidity. Three
month CDs were dealt at 9.70%-9.80% while the six months and beyond CDs
were dealt at 9.85%-9.95% level. Rates may rise in the coming fortnight since
demand from mutual funds will be relatively muted due to the outflow of money
from the liquid funds (for payment of advance taxes by corporate).
 State Bank of Travancore & State Bank of Patiala placed INR 1bn each of one year
CD at 9.86% and 9.85% respectively. OBC & BOI placed INR 3bn & INR 5bn
respectively of three month CD at 9.70%. Corporation Bank placed INR 4bn of 24th
June maturity CD at 9.65%.
Money markets
 Overnight rates ended flat since the demand for funds from banks remained muted
towards the end of the reporting cycle. In the coming fortnight, outflow of advance
taxes to the tune of INR 450-INR500bn is likely to put pressure on the overnight
rates. At the LAF facility, the central bank injected INR 621bn compared to INR
600bn on Thursday.