Bond yields staying stable amid status quo

The RBI Governor did not change the rates as he considers food inflation as a problem due to heat waves in the next three months. The policy stand was also kept at withdrawal of accommodation - Anil Kumar Bhansali, Executive Director, Finrex Treasury Advisors, tells Bizz Buzz

Mumbai: Even as the Reserve Bank of India’s policy announcement was on expected lines, the bond yields remained stable. The RBI kept repo rate unchanged for the seventh time in a row at 6.50 per cent. This day also coincided with the first G Sec auction of the year and also the auction of a new benchmark bond (10 year). The 10-year benchmark bond yield opened at 7.0892 per cent, from close of 7.0934 per cent. The yield on 10-year benchmark 7.18 per cent 2033, was at 7.1113 per cent.

Talking to Bizz Buzz, Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors, says: “The RBI Governor did not change the rates as he considers food inflation as a problem due to heat waves in the next three months. The policy stand was also kept at withdrawal of accommodation.”

The market had expected a similar view and therefore there is no change in 10-year yield for now. Also, after a long time, a multi priced auction of new G-sec is happening which is also keeping the market tentative and keeping yields constant, he said.

With system liquidity in reasonably large positive mode (although a temporary one), there are fewer negatives. Banks are also grappling with the new investment valuation guidelines and the trading activity this week has been muted so far. Bond supply for H1 is smaller than the usual calendars and is more directed at the longer end, said the treasury head of a bank, requesting anonymity. We can see action from the third week as participants return after a holiday littered second week, he said.