Stability returns to bond market, but till when?
The key to the direction of bond yield will be inflation and the policy rate trajectory
On 17 July, the traded volume of the 10-year benchmark government paper rose to ₹ 32,450 crore, something last seen in October 2016. The volume in the bond market has started rising slowly and volatility is ebbing. It’s the return of the public sector banks in the market that has made the difference. Data show they were net sellers of government papers in the secondary market in April and May; turned buyers in a limited way in June and in July, their buying has been rising steadily. A gentle nudge by the government could be behind this but no treasury manager of a public sector bank will admit it.