Treasury gain party over for banks

As rate easing cycle comes to halt, so does the high surge that banks witnessed in their income

The Reserve Bank of India (RBI)’s rather hawkish stance while announcing the sixth bi-monthly monetary policy review has surprised investors in the equity and bond markets. In fact, yields on the 10-year government security (G-sec) surged 31 basis points to 6.74 per cent on Wednesday (highest single-day surge in nearly 40 months) and another 10 bps on Thursday. 

RBI’s neutral stance indicates the rate-easing cycle is largely done with. This means that as against a sharp drop of over 100 bps in G-sec yields over the past year, bond yields are likely to remain a lot more stable, with an