Markets had priced in RBI rate hike; gilts, rupee trade flat

Government's 10-year bond yield jumped 8 bps after RBI rate hike, but soon erased its gains

Ravindra N. Sonavane
Updated1 Aug 2018, 03:58 PM IST
The RBI rate hike is on account of inflationary pressures arising due to an increase in minimum support prices (MSPs) for kharif crops. Photo: Reuters
The RBI rate hike is on account of inflationary pressures arising due to an increase in minimum support prices (MSPs) for kharif crops. Photo: Reuters

Mumbai: The government 10-year bond yield jumped 8 basis points after the Reserve Bank of India (RBI) increased its repo rate by 25 basis points. However, soon it erased all the gains and was trading little changed. Earlier, the 10-year bond yield rose to 7.85% from its Tuesday’s close of 7.773%. At 2.45pm, it was trading at 7.761%, below its previous close.

Bond yields and prices move in opposite directions.

One basis point is one-hundredth of a percentage point.

The RBI raised policy rates by 25 basis points to 6.5% on account of inflationary pressures arising due to a hike in minimum support prices (MSPs) for crops. Earlier in its June meeting, the central bank had hiked the rate by 25 basis points to 6.25%.

Of the 15 economists surveyed by Mint, 12 expected RBI to raise its repo rate, the rate at which it lends to commercial banks, to 6.5%. Only three economists expected the RBI to keep rates unchanged at 6.25%.

The RBI’s rate move is the second in eight weeks and follows emerging-market counterparts in Indonesia, the Philippines and elsewhere who are trying to counter currency routs triggered by higher U.S. rates and a stronger dollar.

The central bank also raised the average inflation projection for the second half of the year to 4.8% from 4.7% in June. The central bank expects inflation to edge higher to 5% in the first quarter of the next fiscal year.

The Sensex fell 0.4% or 148.90 points to 37,457.68. Since January, it has gained 10.42%.

The rupee was trading at 68.58 to a dollar, down 0.05% from its previous close of 68.55. The currency opened at 68.59 to a dollar.

Bloomberg contributed this story.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.

MoreLess

News in Numbers

Numbers that help you understand news better
10,733

$42 T

₹4,814 Cr

2,165

317,641

$725.67 M

First Published:1 Aug 2018, 03:58 PM IST
HomeMarketStock-market-newsMarkets had priced in RBI rate hike; gilts, rupee trade flat

Most Active Stocks

Indian Oil Corporation

176.85
03:53 PM | 25 JUL 2024
8.1 (4.8%)

Bharat Electronics

301.30
03:59 PM | 25 JUL 2024
1.15 (0.38%)

Bharat Petroleum Corporation

326.00
03:59 PM | 25 JUL 2024
11 (3.49%)

NTPC

392.05
03:52 PM | 25 JUL 2024
-0.5 (-0.13%)
More Active Stocks

Market Snapshot

  • Top Gainers
  • Top Losers
  • 52 Week High

Data Patterns India

3,391.95
03:47 PM | 25 JUL 2024
307.6 (9.97%)

Jyothy Labs

547.15
03:53 PM | 25 JUL 2024
39.2 (7.72%)

Tata Motors DVR

747.10
03:47 PM | 25 JUL 2024
45.6 (6.5%)

Tata Motors

1,091.05
03:52 PM | 25 JUL 2024
63.4 (6.17%)
More from Top Gainers

Recommended For You

    More Recommendations

    Gold Prices

    • 24K
    • 22K
    Bangalore
    71,295.00-117.00
    Chennai
    70,534.00-182.00
    Delhi
    70,672.00-44.00
    Kolkata
    70,672.00-44.00

    Fuel Price

    • Petrol
    • Diesel
    Bangalore
    102.86/L0.00
    Chennai
    100.75/L-0.03
    Kolkata
    104.95/L0.00
    New Delhi
    94.72/L0.00
    OPEN IN APP
    HomeMarketsPremiumInstant LoanBudget