FIMMDA increases trading range of G-secs due to weakening rupee

The yield on the 10-year benchmark government bond 7.16% 2023 ended at 7.59% on Wednesday compared with previous close of 7.50%.

Due to the weakening of the rupee against the dollar, the Fixed Income Money Market and Derivatives Association of India increased the trading range of bonds on Wednesday, as some bonds had hit their upper yield circuits, said dealers.

The yield on the 10-year benchmark government bond 7.16 per cent 2023 ended at 7.59 per cent on Wednesday, compared with the previous close of 7.50 per cent.

The rupee touched a new all-time low on Wednesday due to heavy month-end dollar demand from importers, fall in most emerging Asian currencies and continued sell off by foreign institutional investors in domestic markets.

The rupee touched 60.77 per dollar during intra-day trades and closed at 60.73. It had opened at 59.74 and during the day, it touched a high of 59.73. The rupee had closed at 59.68 against the dollar yesterday.

Government bond yields have been on the rise as further repo rate cuts are expected to get delayed due to global uncertainties and a weak domestic currency. The repo rate has been cut by 75 basis points so far this year and currently stands at 7.25 per cent.

According to government bond dealers, yields might rise further from current levels as the rupee is seen to be weakening and touching a new all-time low soon.

A few treasury heads of banks agree their treasury portfolio is set to take a hit in this quarter, which ends on Saturday.

The Reserve Bank of India did intervene in the market on Wednesday to arrest volatility, but the intervention did not help much in a situation when the forex reserves are depleting, said dealers.