While the focus is on rising bond yields and erosion in bank treasury profits, many are missing the intense fight between bulls and bears in India's bond market
It is no secret that Indian banks’ treasury income, which contributed handsomely to their profit in calendar year 2016 as bond prices rose and yields fell, has been substantially eroded since January. The yield on the benchmark 10-year paper rose 29 basis points during the last quarter of fiscal year 2017, from 6.4% on 1 January to 6.69% on 31 March. One basis point is a hundredth of a percentage point. Many banks would probably end up booking treasury losses in this quarter. The 10-year yield has risen further in the past fortnight to 6.78% and will probably remain range bound in the first quarter of the current fiscal year.