MUMBAI: Indian bond yields may rise on 20 February as cash surpluses with banks are expected to fall in the coming two weeks, reducing the money available to buy debt.
The second phase of a 50 basis points increase in the amount of cash banks need to keep with the central bank takes effect on March 3. The first stage kicked in on 24 February.
The measure is expected to drain Rs. 14,000 crore ($3.2 billion) from the banking system. This was the second time in two months the central bank raised the cash reserve ratio to rein in inflation, which was at two-year high of 6.73 % on February 3.
The yield on the 10-year federal bond ended at 8.01 % February 19, a notch lower than the previous close of 8.02 %.