Bond yields spike 11 bps on Viral Acharya's interest rate risk remarks

Acharya's criticism on interest rate risk has not gone down well among public sector bankers

Reserve Bank of India (RBI) Deputy Governor Viral Acharya’s criticism on managing interest rate risk in banks has not gone down well among most treasurers, who termed his speech as too constricted in its approach.

Bond yields spiked 11 basis points (bps) to close at 7.38 per cent, from its previous close of 7.27 per cent on Monday as the markets interpreted the central bank won’t extend support, either by allowing spreading of losses over few quarters, or through liquidity support, to ameliorate the pain faced by banks due to adverse movement of yields.

As yields rise, bond prices fall.