RBI monetary policy: Bond yields surge on fears of further rate hikes

A rise of one basis point in the 10-year bond yield corresponds to a fall of roughly 7 paise in price

The sovereign bond market witnessed a sharp sell-off on Friday as the Reserve Bank of India’s (RBI’s) unequivocal commitment to bringing down inflation came as a surprise to the market, which had pinned its hopes on a softer approach by the central bank.

The yield on the 10-year benchmark 6.54 per cent 2032 paper jumped 14 basis points to close at 7.30 per cent on Friday, marking the sharpest single-day rise since the RBI unexpectedly announced a rate hike on May 4.

Bond prices and yields move inversely. A rise of one basis point in the 10-year bond yield corresponds to a