Mumbai: Yield on 10-year benchmark government securities is likely to range bound with a possibility of softening in the near-term on the back of rate cut expectations, experts say.
The 10-year benchmark G-sec closed at 8.24 percent on Friday, which is five basis points higher than the previous session close of 8.19 percent after the GDP data for Q1 was released along with the fiscal deficit data.
"Bond yield took cue from the GDP data and fiscal deficit on Friday. However, rate cut expectation will drive the yield in the near future," a treasury official of a mid-size public sector bank said.
He also said that yields may hover in the 8.25 percent level in the near future or even soften on the back of a possible rate cut in the next policy.
Referring to the impact of the Q1 GDP figure of 5.5 percent and fiscal deficit data for first four months, he said that fiscal deficit would be a key factor to watch for in the near-term along with overall liquidity situation.
Fiscal deficit in the first four months of 2012-13 stood at 51.5 percent of the budget estimates -- slightly better compared to 55.4 percent in the same period a year ago -- according to Controller General of Accounts (CGA) data released on Friday.
In absolute terms, the fiscal deficit- the gap between expenditure and revenue collection- was Rs 2.64 lakh in the the first four months through July 2012, CGA data showed.
"Fiscal deficit target of 5.1 percent can be achieved if the subsidy on diesel can be decontrolled along with the rise in petrol price. Also, meeting disinvestment target for the current year is also crucial for sticking to fiscal deficit target," Deloitte India senior director Anis Chakravarty said adding that this will be the key indicator for the yield.