Back10-year bond yield surges 15 bps, rupee closes higher against US dollar
The rupee closed marginally higher against US dollar to 64.99, up 0.05% from its previous close of 65.03
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Mumbai: The 10-year bond yield surged over 15 basis points, its biggest single day jump in two month, on Tuesday after state-run banks continued to sell in debt market. This was the third session when the bond yield closed higher.
According to Clearing Corp. of India data, state banks remained net sellers in six of the past eight days. State lenders have sold a net Rs164.60 billion of debt between 27 March-9 April.
The 10-year bond yield closed at 7.379%, up 15 basis points—its most single day gains since 1 February, compared to its previous close of 7.226%. Bond yields and prices move in opposite directions.
“Given all positive surprises domestically, globally rates are in hardening regime, and I don’t think we will be exceptional. It seems Banks too believe this and selling with emergence of sudden opportunity in bond market, while raising lending rates consistently" said Soumyajit Niyogi, associate director at India Ratings and Research Pvt. Ltd.
Yield on government bonds have softened for the past few days after positive announcement from government as well as RBI.
On Thursday, the RBI lowered its inflation forecast. Now it projects 4.5% consumer price inflation for fourth quarter of fiscal year 2018. For first half of fiscal year 2019, inflation forecast at 4.7-5.1% and for second half forecast at 4.4-4.5%.
On 26 March, the government unexpectedly reduced its borrowing programme by around 48% of its budgeted bond sales in the first half.
On 2 April, RBI allowed banks to spread its bond trading losses incurred during December 2017 and March 2018 equally over up to four quarters.
Traders are cautious as the Federal Open Market Committee releases minutes of its 20-21 March meeting on Wednesday, at which central bankers raised their target rate a quarter-point for overnight bank lending.
Meanwhile, rupee closed marginally higher against US dollar to 64.99, up 0.05% from its previous close of 65.03.
Benchmark Sensex index rose 0.27%, or 91.71 points, to 33,880.25. So far this year, it has declined 1%.
So far this year, the rupee has fallen 1.76%, while foreign investors have bought $2.17 billion and $638.90 million in equity and debt markets, respectively.
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