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The yield on the 10-year benchmark government bond is expected to fall further from current levels when it gets replaced by a new 10-year benchmark government bond this Friday. According to traders, the new 10-year benchmark government bond yield is expected to trade in the range of 7.25-30% initially compared with the present 10-year benchmark government bond 8.15% 2022 which closed at 7.42% on Thursday. The yield on the 8.15% 2022 government bonds had ended at 7.46% on Wednesday.
“ The yield on the new 10-year government bond maturing in 2023 will be around 7.25%. It may initially move in the range of 7.25-7.30%,” said a government bonds dealer with a public sector bank.
The yield on the existing 10-year government bond has dropped sharply due to easing inflation data. The Wholesale Price Index (WPI) inflation plunged to sub-5 level to stand at 4.89% in April against 5.96% in the previous month. While Consumer Price Index (CPI) inflation fell to 9.39% in April against 10.39% in the previous month.
“ Before the mid-quarter review of Reserve Bank of India's (RBI) monetary policy, the yield on the new 10-year benchmark government bond may drop to 7.10% on expectations of a further cut in the repo rate,” said a government bonds dealer with a private bank. The repo rate currently stands at 7.25%. RBI had cut the repo rate by 25 basis points in the annual monetary policy held in April.
However, a poll by Business Standard shows that majority expect a status quo on key policy rates on June 17 when RBI will review the monetary policy. “If the repo rate is kept unchanged the yield on the new 10-year government bond will again rise to 7.40%,” said the treasury head of a public sector bank.
