Friday, October 9, 2009

>Indian Fixed Income Market October 2009 (DSP BLACKROCK MUTUAL FUND)

The Benchmark 10-year government bond yield moved from 7.43% pa to 7.17% pa during the month of September due to a variety of factors such as the prospective hike in HTM category by the RBI, reduced supply of government bonds in the second half of the fiscal year and improvement in global sentiment on account of fall in global yields. The 1-year bond yield moved from 4.20% pa to 4.25% pa during the same period. The treasury yield curve (between 10-yr and 1-yr Government Bonds) moved down by 21 basis points (bps) m-o-m to 292 bps for the month of September.

Money Market rates after having inched up through the month, fell sharply towards the end of September in anticipation of mutual fund buying in early part of October. 3M Bank CD rates moved from 3.55% pa to 3.65% pa during the month while the 12M Bank CD rates moved from 5.90% pa to 5.95% pa during the same period.

Corporate bond spreads (between AAA bonds and government securities) for 10-year securities widened by 20 bps to 161 bps during September while narrowing by 56 bps to 131 bps for 1-year maturity bonds due to heavy supply and low demand.

Liquidity in the system continues to be healthy despite the advance tax outflows and month end redemption pressures due to healthy deposit growth and government spending. Currency in circulation (M1) is expected to go up on account of festival related spending.

To see full report: FIXED INCOME MARKET