Govt's recapitalisation plan: Yield hardens on benchmark govt bond in early trade

The yield on the government's 10-year paper, benchmark paper, hardened by three basis points in opening trades, seeking further clarity on the recapitalisation plan.

The bond yield on the 10-year paper was ruling at 6.80-81 per cent range, according to data from Clearing Corporation of India.  

On Tuesday, the yield on benchmark 10-year bonds had eased to 6.78 per cent on Tuesday as against a close of 6.80 per cent on Monday, according to ICICI Bank report.

Gilts had traded in a thin band as traders avoided big bets, ahead of a big announcement by Finance Ministry.

Treasury dealers said it is a knee-jerk negative reaction as the market is looking for clarity on how Rs 76,000 crore will be raised for recapitalization size out of Rs 2,10,000 crore plan.  

On Tuesday, the Union cabinet gave its nod for a plan to inject Rs 2,11,000 crore as capital in the public sector banks in 2017-18 and 2018-19 to meet regulatory norms and expand the business. Out of it, Rs 1,35,000 crore would be through recapitalisation bonds. This component is expected to be cash neutral and would not lead to additional market borrowings. The balance Rs 76,000 crore were to be arranged through budgetary support and market offering.