Yields on 10-year bonds rise marginally post FOMC statement
The RBI will today buy six government bonds worth up to Rs30,000 crore and 20 bonds worth Rs10,000 crore of 12 states. It is also scheduled to buy back the remaining tranche of government securities worth Rs40,000 crore under the GSAP 1.0 program in the secondary market
MUMBAI: Indian bond yields opened higher on Thursday tracking the overnight jump in US treasury yields following the Federal Open Market Committee’s (FOMC) commentary on interest rates. The yield on 10-year government security rose to 6.06% in early deals compared with 6.04% at close on Wednesday.
The US Federal Reserve left policy rates unchanged on Wednesday but committee members now expect two hikes in interest rates by the end of 2023. Earlier the Fed had forecast no change in interest rates till 2023. The yield on the 10-year benchmark US Treasury note soared 6 basis points to settle at 1.57% on Wednesday.
Traders said the Indian bond market had already sold off post the announcement of inflation print. Data released on Monday showed that Consumer Price Index (CPI) inflation rose to 6.3%, above the Reserve Bank of India's comfort range of 2-6%. CPI inflation stood at 4.23% in the April.
The yield on shorter duration sovereign bonds rose to more a than year's high at the Wednesday’s primary sale. The 91-day T-bills yielded 3.47% in the primary auction, a level not seen since 13 May, 2020.
“Some bit of correction has happened in the 10-year yield before the FOMC meeting itself. The yields are unlikely to react to FOMC announcement and instead will closely watch RBI’s actions. The high forex reserve of $600 billon has given a lot of comfort to the market that RBI will not react to any news from FOMC," said a bond trader with a bank.
The Reserve Bank of India will today buy six government bonds worth up to Rs30,000 crore and 20 bonds worth Rs10,000 crore of 12 states. It is also scheduled to buy back the remaining tranche of government securities worth Rs40,000 crore under the GSAP 1.0 program in the secondary market.
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