Government Security Market:
Update The Reserve Bank of India surprised the market by raising reverse repo rate by 25bps last week, after unexpectedly signaling an end to its monetary easing cycle in February, while the authority has said it will use the host of tools including OMO sale of bonds to drain excess cash from the system. After a fall to 6.87 levels the 10 year yield rallied to 6.75 per cent on global clues and buying from overseas funds but went back above 6.80 level on Thursday after the weekly auction result. The RBI devolve the benchmark 6.97 2026 by Rs.3216 crore on the Primary Dealers. In an auction the RBI sold 6.84 2022; 6.97 2026; 7.73 2034 & 7.06 2046 at a yield of 6.7791; 6.8080; 7.4009 & 7.3959% respectively. In a weekly T bill auction the 91 & 364 DTB cut off came at 5.9841 and 6.2192% respectively.
The yield on the 6.97% government bond due Sept. 2026 to 6.8201% from last week level of 6.8186%
Global Debt Market:
Update US Treasuries rallied, after the US dropped the largest non-nuclear bomb in its arsenal on an Islamic State target in Afghanistan. US 10 year yield fell about two basis points to 2.22 per cent. The yield curve from 5 to 30 years steepened. Thr 10 year yield has a potential to fall to 1.88 per cent on a bullish break of 2.15 per cent. US forces in Afghanistan deployed the military's largest non-nuclear bomb, a GBU -43 on a IS target in Afghanistan, sparking a geo-political tension that have largely driven treasuries gain. Initial Jobless claim came in at 234000 beating the estimate of 245000.
Bond Market Ahead:
Overseas funds total investment in Indian government and corporate notes have jumped 539.5 billion rupees so far this year, already making for the biggest inflow since 2014 as the reform process assured for a better prospect in Indian Economy. The Reserve Bank of India declared the issuance of TBills under MSS for an amount of 1000 billion as per the schedule will put a cap on the yield to fall further.
April 17 - 250 billion April 24 - 250 billion
May 2 - 250 billion May 8 - 250 billion
Global clues will support the market and 10 year yield has a potential to move towards 6.59 levels provided it break 6.72 levels.
* Buy 6.97 2026 around 6.85 with a target of 6.77 and a stop loss of 6.89 levels
* Buy 6.79 2029 around 7.10 with a target of 7.02 and a stop loss of 7.14 levels
Yield Outlook for the week
10 year Benchmark 6.97% GOI 2026 likely to move in the range of 6.75% to 6.85% levels
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