10-year yield jumps up on global rate fears, supply glut

The yield on the benchmark 10-year paper, five days after the Fixed income Money Market and Derivatives' Association pegged the paper's year-end closing rate at 6.66 per cent for valuation purposes, has shot up by nine basis point to 6.75 per cent on Tuesday.

One basis point is one hundredth of a percentage. Loads of supply of government papers, marking the debut of the government borrowing programme during this month, and rising interest rates globally have created a bearish sentiment in the government securities market.

Adding to the worry is the rising oil prices that touched a high of $ 57 per barrel overseas, said a dealer.

Government borrowing for first half of the financial year is pegged at Rs 83,000 crore, almost 41 per cent higher than the corresponding period last year. April itself will witness auction of government papers worth Rs 15,000 crore.

Preparing afresh for the ensuing auction on Tuesday, banks offloaded a part of their portfolio. This pulled down prices by around 40 paise in the long-tenure papers and around 10-15 paise in shot-term papers.

The 10-year benchmark 7.38 per cent 2015 that had already touched 6.73 on close of trading sessions last week consistently lost in prices to move up to 6.75 per cent.

The entire market is watchful of the cut-off rate to be announced on the auction of 2012 paper. The foreign exchange market is equally bearish, tracking a rising dollar globally.

Against a close of 43.73/74 last weekend, the spot rupee opened lower at 43.77/78. It further lost during the day to 43.7950 before closing for the day at 43.7750 to a dollar.