Moody's India rating upgrade: Bond market rallies, then fades

Gilts failed to retain the gains, with traders booking profit

The bond markets rose on news of the sovereign rating upgrade for India in the morning but the cheer didn't last, due to concerns over the fiscal deficit and inflation trajectory, pushing yields above seven per cent again. The yield on the government benchmark (10-year) eased sharply (about 10 basis points) to fall below seven per cent in the morning hours but closed at 7.05 per cent, against Thursday's close of 7.06 per cent.

Bank treasury executives said initial optimism at the rating upgrade from rating agency Moody’s led the yields to open about 10 basis points lower than Thursday's close.