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The Reserve Bank of India (RBI) auctioned a new 10-year government bond on Friday, to soon replace the existing 10-year benchmark 8.15 per cent 2022. There was no devolvement on primary dealers on the 7.16 per cent 2023 bond. There was auction worth Rs 7,000 crore for the bond, and the cut-off yield was at 7.16 per cent. The yield of the 7.16 per cent 2023 government bond ended at 7.16 per cent in the “when issued” market.
According to dealers, next week the yield may fall further from current levels due to value buying and expectations of a further cut in the repo rate in the mid-quarter review of the monetary policy next month. The yield on the current 10-year benchmark bond 8.15 per cent 2022 ended at 7.40 per cent compared with the previous close of 7.39 per cent.
During intra-day trades the yield had dropped to 7.32 per cent, but in late afternoon trades the yield rose after global rating agency Standard & Poor’s said the outlook on India’s long-term rating remains negative though it affirmed its ‘BBB-’ long-term and ‘A-3’ short-term unsolicited sovereign credit ratings on India.
In the past trading sessions the bond yields have been coming down because the Wholesale Price Index inflation for April came down to 4.9 per cent while the Consumer Price Index inflation moved to 9.4 per cent. These data points gave the hope that the Reserve Bank of India will slash the repo rate further, which is currently at 7.25 per cent.
