Mumbai: The Reserve Bank of India (RBI) on Friday introduced a new benchmark five-year bond worth Rs4,000 crore at a cut off yield of 7.17%.
This, according to bond dealers, will address the distortion in sovereign yield curve in which the 6-year bond has a higher yield than the 10-year bond.
The yield on the 6-year paper is at 7.6668%, higher than the 10-year paper
at 7.61%. The yield on the existing 5-year paper is at 7.41%.
According to bond dealers, the inversion of the yield curve is a temporary phenomenon caused by the non-availability of short term papers to trade.
With papers made available in this segment, traders expect yield curve to normalize.