'Yield on 10 year G-Sec to ease next year on rate cut hopes'
The recent liquidity deficit seen in the system would ease as government departments start spending in the fourth quarter of current financial year, they said.
"Going ahead, inflation is going to trend down, which will give the central bank space for monetary easing. Also, the fiscal reform measures announced by the government will boost growth.
"In this perspective, yields are likely to fall next year and are likely to be around 7.75 per cent on 10-year benchmark by the end of March, 2013," IDBI Bank Head (Treasury) N S Venkatesh told PTI here.
He also said that next year's Union Budget would give further direction to the bond market.
Talking about the liquidity deficit seen in the system, the central bank will continue with open market operations (OMOs) to tide over the deficit.
Currently, banks are borrowing around Rs 1.5 lakh crore from the repo window on the back of liquidity crunch faced by the system, which is way above the RBI's comfort level of around Rs 60,000 crore.
Referring to this matter, Indian Overseas Bank Head (Treasury) B S Keshava Murthy said yields on 10-year G-Secs would fall by 8-10 basis points by March, 2013.
"With possibility of monetary easing by the Reserve Bank and fiscal reforms taken up by the government, yield is likely to fall by 8-10 basis
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