G-sec market: 10-year benchmark bond yield falls on subdued trading activity

Vijay Sharma, senior executive vice-president at PNB Gilts, points out that the volumes were extremely low on Monday with no trades seen during the first few minutes of the market opening.

By: ENS Economic Bureau | Published: March 6, 2018 2:17:42 am

The 7.17 per cent 10-year benchmark bond maturing in 2028 on Monday dropped to Rs 95.87 from Rs 96.12 previously, while its yield edged up to 7.78 per cent from 7.74 per cent.

The 6.68 per cent government security maturing in 2031 also dipped to Rs 89.10 from Rs 89.20, while its yield inched up to 8.01 per cent from 8.00 per cent. The 6.79 per cent government security maturing in 2027 fell to Rs 92.55 from Rs 92.71, while its yield edged up to 7.95 per cent from 7.92 per cent.

M S Gopikrishnan, head of FXRC trading, South Asia, Standard Chartered Bank, points out that there was lacklustre participation on Monday in the G-sec market as the year draws to an end.

“Demand for bonds has been on a lower side since the past few months which has led to this situation. The trading activity is expected to pick up only in April when fresh supply of G-secs hits the market and foreign portfolio investor (FPI) investment limits in G-secs is due for review. PSU banks have been absent from the market for some time now as any selling may result in booking losses and their appetite to buy additional bonds has dwindled,” he said. According to the negotiated dealing system, the benchmark bonds witnessed 324 trades during the day with the total traded amount standing at just Rs 2,405 crore. Dealers indicate this is one of the lowest traded volumes seen over the last few months.

Vijay Sharma, senior executive vice-president at PNB Gilts, points out that the volumes were extremely low on Monday with no trades seen during the first few minutes of the market opening.

“Even the benchmark bonds witnessed very little trading activity. Volumes remained low as market participants, traders and investors alike, are unwilling to trade actively as the year is coming to an end. The market is worried about the new supply of G-secs that will hit the market come April, given that PSU banks have been muted buyers in the past many months,” he said. Even foreign portfolio investors have started to cut back on their holdings of Indian bonds. According to Bloomberg data, FPI holding of Indian bonds in 2018 stand at just over a billion dollar. with FE

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