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Journalism of Courage
The yield on government bonds rose across tenures on Tuesday after the Reserve Bank of India left policy rates unchanged and gave little clarity on its moves in coming months. The yield on the benchmark 10-year rose three basis points to end at the day’s high of 7.84 per cent.
“The policy was not as clear or even dovish as the market expected. There was no clarity on how the RBI expects transmission to take place and how banks would be able to cut base rates amid such high credit costs due to bad loans,” said Sidharth Rath, president of treasury, business banking and capital markets at Axis Bank.
The RBI noted that banks had cut base rates by around 30 bps while the cumulative reduction in policy rate was 75 bps in 2015. Yields had eased intraday after Rajan said that there would be periodic reviews of the investment limits of foreign institutional investors in bonds.
Ever since the limits were exhausted in August 2014, market participants had been demanding an increase as the potential dollar inflow into Indian bonds was high.
