Yield Fails To Attract Dealers, RBI Bond Auction Devolves – The Indian Express

Of the Rs 24,000-crore bond auction, bonds worth Rs 7,267 crore devolved on underwriters — primary dealers. The maximum devolvement of Rs 4,702.68 crore came in the 5.74 per cent government securities maturing in 2026.

The 10-year benchmark bond yield closed at 6.4617 per cent on Friday. The yield has gone up by nine basis points in the last one month. Some banks and NBFCs have started to increase their deposit rates, signalling that interest rates are set to rise in the coming year.

After bottoming out at 5.97 per cent in May 2021, India’s 10-year bond yields have been steadily inching higher with yields averaging at 6.35 per cent in November 2021, the highest since the beginning of the pandemic. In recent weeks, led by the sharp upward move in VRRR auction cut-offs, short-term money market rates have hardened considerably.

“While the RBI in the December policy review kept the rates unchanged, it will continue with its surplus liquidity calibration. The ongoing normalisation in monetary policy by key central banks across the world along with expectation of domestic inflation creeping up, is likely to provide upside to yields with 10-year bond rate expected to move towards 6.50 per cent by March 2022 or even before that, said an analyst.