10 year breaches 6.50%

Upward trend in prices in expected to continue unabated especially in the medium and long-dated papers. Liquidity in the system would act as one of the primary drivers for the movement in the yields. Market is kind of having its final party before the budget and financial year closing.7.38% 2015 has touched the 106.70/75 levels, coming close to breach the 6.50% levels in the 10- year benchmark.. Some traders are targeting the 6.30-6.35% band for the 10 year benchmark in the coming few days. The government looking to borrow less in the coming year FY 2005/06 in order to keep its deficit lower could result in shortage of bond supply, hence pushing yields lower. Thus it could be liquidity, lower inflation and that together with the shortage of bond supply could do the magic for the bond dealers.The banking industry is abuzz with activity with the possibility of mergers, public issues planned and some talk of divestment of minority government stakes. However, analysts say that government and RBI guidelines are sorely required in each of these areas, for the PSU banking sector to realise its full potential.