Rupee stable, bond yields fall post RBI policy

Yields likely to fall further, rupee could weaken

The rupee was trading stable while government bond yields fell after the Reserve Bank of India's (RBI) monetary policy announcement.

The central bank cut the Marginal Standing Facility (MSF) rate by 25 bps and hiked the repo rate by an equal quantum. Besides that RBI also increased the liquidity provided through term repos of 7-days and 14-days tenure to 0.50% of banks net demand and time liabilities (NDTL) from 0.25% earlier.

At 11:35am, the rupee was trading at Rs 61.52 compared with previous close of Rs 61.53 per dollar.

The yield on the 10-year benchmark government bond 7.16% 2023 was trading at 8.60% compared with previous close of 8.66%.

“Bond yields fell because the hike in the repo rate was on expected lines and there was also a cut in the MSF rate. Besides that the increase in liquidity was provided through term repos of 7-days and 14-days tenure to 0.50% of banks NDTL from 0.25% earlier,” said S Srinivasaraghanva, head of treasury at Dhanlaxmi Bank.

According to Srinivasaraghanva, for the rest of the day the yield may trade in the range of 8.55% to 8.62% and the bias will be more towards the yields falling.

Also, currency dealers opine that the rupee may weaken during the day due to month-end dollar demand from importers.