Higher cut-off for bond auction pushes yields up

Benchmark 10-year security 7.16% GOI 2023 closed day at a yield of 8.28%, a rise of 22 basis points over previous close

The Reserve Bank of India’s acceptance of bids with higher yields in its bond auction and a falling rupee pushed the yield on government securities in the secondary market on Friday.

Treasury executives said RBI accepted bids quoting a higher bond yield, perhaps indicating its comfort with the hardening for long-term paper. This moved yields up.

The benchmark 10-year security 7.16 per cent 2023 government bond closed the day at a yield of 8.28 per cent, a rise of 22 basis points (bps) over Thursday’s close. Also, the government bond market traded on a considerably bearish note, tracking weakness in the rupee. The yields closed 15-20 bps higher over Thursday’s closing trades.

A head of treasury with a south-based public sector bank said the Rupee had fallen continuously, despite many steps by the Reserve Bank of India to curb volatility.

There was suspense over the next step (on liquidity squeeze). This directly impacts the bond market activity, he said.

The government announced an auction to raise Rs 15,000 crore through seven-day cash management bills (Rs 3,000 crore) and Treasury bills (91-day – Rs 7,000 crore and 364-day – Rs 5,000 crore).