India bond yields to decline further over global tensions, say dealers
The bond market participants see the yields falling by another 15-20 basis points from the present level
 "Bond market uncertain about govt's borrowing plans in next fiscal")
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With the bond yields in Europe in a negative territory, and the market expecting more than one rate cut by the Reserve Bank of India (RBI), the Indian bond market is at the midst of a great rally, with some more legroom to go.
The 10-year government bond yield fell to 6.84 per cent, recovering a little from Tuesday’s 6.81 per cent. On Monday, the yields had closed at 6.93 per cent. As yields rise, prices of bonds fall and vice-versa.
The bond market participants see the yields falling by another 15-20 basis points from the present level.
Government bond prices shot up in Eurozone on Tuesday after European Central Bank Chief Mario Draghi indicated that more rate cuts and bond buying could be in the offing to stimulate the economy in the face of trade war related uncertainties.
The German 10-year bund yield sank 7 basis points to a -0.32 per cent, French bond yield fell to a -0.02 per cent. Prices of bonds move the opposite direction of yields.
Meanwhile, the US 10-year treasury yield fell to a 21-month low of 2.017 per cent as the US Fed started its two-day meeting.
The Indian bonds also reacted to that global movement, and on continuation of ease money policy, which eventually should find its way into emerging markets assets, such as those in Indian bonds and equities.
In terms of global uncertainties, such as trade tensions between the US and China, money flows into bonds. This is positive for the bond market, which is facing constant supply pressure. The yields are poised to fall even further.
“With global uncertainty currently getting front-loaded with every passing day, and a weak domestic growth outlook, yields are likely to decline from current levels, reflecting weak real economic activity. Empirical evidences do suggest such movements in Indian context,” said Soumyakanti Ghosh, chief economic advisor at State Bank of India.
The 10-year government bond yield fell to 6.84 per cent, recovering a little from Tuesday’s 6.81 per cent. On Monday, the yields had closed at 6.93 per cent. As yields rise, prices of bonds fall and vice-versa.
The bond market participants see the yields falling by another 15-20 basis points from the present level.
Government bond prices shot up in Eurozone on Tuesday after European Central Bank Chief Mario Draghi indicated that more rate cuts and bond buying could be in the offing to stimulate the economy in the face of trade war related uncertainties.
The German 10-year bund yield sank 7 basis points to a -0.32 per cent, French bond yield fell to a -0.02 per cent. Prices of bonds move the opposite direction of yields.
Meanwhile, the US 10-year treasury yield fell to a 21-month low of 2.017 per cent as the US Fed started its two-day meeting.
The Indian bonds also reacted to that global movement, and on continuation of ease money policy, which eventually should find its way into emerging markets assets, such as those in Indian bonds and equities.
In terms of global uncertainties, such as trade tensions between the US and China, money flows into bonds. This is positive for the bond market, which is facing constant supply pressure. The yields are poised to fall even further.
“With global uncertainty currently getting front-loaded with every passing day, and a weak domestic growth outlook, yields are likely to decline from current levels, reflecting weak real economic activity. Empirical evidences do suggest such movements in Indian context,” said Soumyakanti Ghosh, chief economic advisor at State Bank of India.