10-year bond yields rise to a 20-month high on rate hike 'signal'

Monday's rise in bond yields was also triggered by the quarter-end selling by mutual funds and other investors, said bond dealers

The 10-year bond yields rose to a 20-month high after the Reserve Bank of India (RBI) on Monday announced a surprise Rs 2 trillion variable rate reverse repo (VRRR) auction, which the market interpreted as the central bank’s signal to tighten the rate much earlier than anybody had pencilled in.  

The central bank announced the VRRR auction in the morning, and scheduled it for the same day. A surprised banking system offered Rs 81,160 crore to the central bank, instead of the Rs 2 trillion the central bank sought. The whole amount was absorbed by the RBI for a cut-off of