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Friday, September 24, 2021

Benchmark bond yield rises 14 bps to cross 6% on rising retail inflation

Meanwhile on Friday, the central bank sold the 2050 bond for Rs 7,000 crore, the longest-maturity debt, at a cut-off yield of 6.7596 per cent.

By: ENS Economic Bureau | Mumbai |
August 22, 2020 1:19:16 am
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Higher retail inflation is pushing up bond yields again. The yield on the benchmark 10-year government bonds on Friday rose by 14 basis points to 6.09 per cent, the highest level since early May. The yield has been steadily rising over the last one month, in line with the rising retail inflation.

The rise in yields on Friday followed concerns raised by the members of Monetary Policy Committee (MPC) over the elevated inflation which was at 6.93 per cent in July. Notwithstanding large rate cuts to spur growth over the last year and a half, growth has steadily declined despite the 250 bps reduction in Repo rate to 4 per cent since February 2019. The MPC decided to stay on hold with regard to the policy rate and “remain watchful for a durable reduction in inflation to use the available space to support the revival of the economy”.

Meanwhile on Friday, the central bank sold the 2050 bond for Rs 7,000 crore, the longest-maturity debt, at a cut-off yield of 6.7596 per cent. The 2034 bond of Rs 11,000 crore was sold at a yield of 6.4071 per cent. The RBI accepted Rs 2,000 crore extra in the 2034 sale. It also sold 2025 bond for Rs 12,000 crore at a yield of 5.3804 per cent. The RBI also announced the sale of Treasury Bills worth Rs 35,000 crore on August 26.

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