G-sec yields surge to 9.55%

The price of the ten-year benchmark paper 8.24 per cent 2018 fell by around Rs 3 from an opening of Rs 94.80 to the day’s low of Rs 91.87, while the yield rose to a high of 9.55 per cent after the central bank’s decision to raise the cash reserve ratio (CRR) by 25 basis points and the repo rate by 50 basis points in its quarterly monetary policy review on Tuesday.

However, during the day, the prices recovered by 30-40 paise and the benchmark paper closed at 9.40 per cent as against an opening of 9.07 per cent on Monday.

 

According to dealers, the Reserve Bank of India’s measure may trigger heavy selling of government securities in the following days since market players will have to realign the investment portfolio at the existing yields and provide for the losses before re-entering the market at new levels.

CRR is the portion of the total deposits garnered by banks over a fortnight and deposited with RBI as a statutory obligation. Repo is the rate at which RBI infuses liquidity into the system.

There was not much movement in other securities and there were stray deals. Dealers pointed out that the cut-off yield on the 91-day treasury bills is likely to go up by 10-15 basis point on Wednesday as against a cut-off yield of 9.13 per cent last week.