Illiquid five-year bond distorts yield curve

The only representative of the five-year paper is the one issued on April 16

Lack of five-year bonds in the market has pushed up yields to slightly higher than 10-year G-secs. While this may sound like an inverted yield curve, it can be best described as a ‘hump’ shaped yield curve. An inverted yield curve happens when the short-term bond yields rise above the longer tenure segments. The yield on the five-year bond closed at 7.79 per cent on Friday, while 10 year closed at 7.728 per cent. The one year bond was at 6.797 per cent, two year at 7.376 per cent, while three year was at 7.603 per cent.

While an inverted