Yields on govt bonds to ease further, say experts

Yields on government securities are likely to fall further in the coming weeks due to the announcement of liquidity-easing measures by the Reserve Bank in its mid-term policy review last Friday, bank officials say.

"Yields on government bonds will ease in the coming weeks as there was a mention (in the mid-term review) of conducting open market operations (OMOs) by the RBI in the case of liquidity strain. So, as liquidity situation is taken care of, the yields should fall," IDBI Bank Treasury Head NS Venkatesh told PTI.

Open market operations (OMO) are conducted by the Reserve Bank of India to infuse liquidity into the system through the buy-back of government bonds.

On Friday, the yield on a 10-year benchmark government bond closed at 8.37%, 16 basis points lower than a week before.

On the possible yield on 10-year G-Secs next week, Venkatesh said it may move down to 8.30%.

In the last three weeks, the central bank has already infused around Rs 24,500 crore into the system through OMO and is likely to infuse more in the near future.

Other treasury officials said though yields will ease, they will not ease to a great extent, as the market has already factored in the positives of the monetary policy announcement.

"Definitely it will ease further, but I don't expect yields easing to a larger extent. Rather, it may hover around the 8.34-8.35 level on a 10-year G-sec," Corporation Bank GM (Treasury) P Rajaram Karanth said.

He also said the government's borrowing programme will largely determine the yields on government bonds.

Recently, the government said it would borrow an additional Rs 53,000 crore from the market over-and-above the Rs 4.17 lakh crore estimated earlier, which will translate into a higher flow of government securities for subscription during this period.