Bond yields rise as RBI might suck out Rs 10,000-cr liquidity

The yield on the 10-year benchmark bond ended stable at 7.96% on Friday

Government bond yields are seen rising this week as the central bank announced an open market operations (OMO) sale of government bonds after market hours to suck out excess liquidity from the system.

The OMO will be conducted for an aggregate amount of Rs 10,000 crore for four government bonds through multi-security auction using the multiple price method on Tuesday.

“Rise in yields will be by two to three basis points as the Reserve Bank of India (RBI) announced an OMO to suck out excess liquidity,” said the head of treasury of a large state-run bank. Few bond traders feel the rise may even be a bit more by about five basis points from current levels.

The yield on the 10-year benchmark bond ended stable at 7.96 per cent on Friday. The yield on the new 10-year bond had ended at 7.80 per cent compared to the previous close of 7.79 per cent. The rupee is expected to record some weakness this week as traders believe RBI may step up dollar purchases to boost the foreign exchange reserves.