You are here: Home » Economy & Policy » News
Business Standard

Bond yields surge on buzz that PMO is opposed to sovereign bonds

Subhash Chandra Garg's transfer to the power ministry, from being economic affairs secretary, also fuelled the speculation, even as there was no official announcement on this

Anup Roy  |  Mumbai 

bonds, mutual funds, dividends, NPAs, income, investment, savings, finance, PF

spiked up to 10 basis points (bps) on Thursday on that the government could be dropping the idea of a sovereign bond issued in foreign currency. Subhash Chandra Garg’s transfer to the power ministry, from being economic affairs secretary, also fuelled the speculation, even as there was no official announcement on this.

Now the plan could be to raise rupee-denominated bonds. According to a report by agency Cogencis, the Prime Minister’s Office (PMO) has asked the finance ministry to issue rupee-denominated bonds, instead of foreign currency bonds. The agency quoted an anonymous source saying the decision was taken after stakeholder feedback following the Budget. This would eventually mean that the dynamics of the borrowing would be very similar to what the local determine.

Bond yields surge on buzz that PMO is opposed to sovereign bonds

The yields on the 10-year bond closed at 6.51 per cent, after falling to 6.54 per cent in the intra-day trade. “If the plan is scrapped, then there is no reason for the to remain low. The dollars are not coming, and the rupee is not strengthening to that extent. And if the overseas plan is cancelled altogether, the bond supply is coming back to the domestic market,” said Devendra Dash, head of asset liability management at AU Small Finance Bank.

The bond yields have fallen about 100 bps since January, reacting to 75-bp policy rate cuts by the RBI since February. The market expects the RBI to cut rates by another 25 bps in the August policy.


First Published: Fri, July 26 2019. 01:18 IST
RECOMMENDED FOR YOU