10-year bond yield rise as traders await RBI policy
Mumbai: Government bond yield rose further on Monday, tracking US bond yields that surged after strong job data increased prospects of a rate hike by the US Federal Reserve next month.
Yield on India’s benchmark 10-year government bond ended at 7.605% from its previous close of 7.562%. Bond yields and prices move in opposite directions.
On Friday, US Labor Department data showed non-farm payrolls rose 200,000 in January, exceeding the median estimate of economists for a 180,000 increase as the jobless rate held at a near 17-year low of 4.1%. The next US Fed policy meet will start on 21 March.
Traders will also keep an eye on the Reserve Bank of India’s (RBI) interest rate decision on 7 February. Analysts expect the RBI to keep interest rates on hold on expectations that inflation may accelerate further due to higher crude oil prices and a proposed hike in minimum support prices (MSP) for farmers.
Of the 15 economists surveyed by Mint, 14 expect the central bank to keep repo rate—the rate at which the central bank infuses liquidity in the banking system—unchanged at 6%. Only one expects a rate hike of 25 basis points.
Bonds have been under pressure after the government breached its fiscal deficit target for fiscal year 2017 to 3.5% from earlier target of 3.2% and revised upward its deficit target for next fiscal year to 3.3% from 3% earlier. This could prompt the RBI to change its policy stance in the near future, say analysts.
The rupee closed at 64.07, down 0.01% from its previous close of 64.06. The home currency opened at 64.22 and touched a low of 64.23 a dollar.
The benchmark Sensex index fell 0.88% or 309.59 points to 34,757.16 points on Monday. So far this year, Sensex has risen 3.5%.
The rupee has weakened 0.3% this year, while foreign investors bought $2.22 billion in equities and $1.67 billion in debt.
- Indian Oil to invest Rs70,000 crore to expand refining capacity
- PNB-Nirav Modi fraud: Nexus between diamond traders and stock market brokers under scanner
- NTPC eyes 100% equity in some JVs with state utilities, stressed assets
- Maharashtra allows privatisation of cooperative spinning mills, powerloom societies
- Pakistan borrows $500 million from China