Gilt yields drop 29 bps on govt's lower borrowing target for H1FY19

Relief to banks as pressure from MTM valuation will subside for 2017-18

The yield on 10-year gilt crashed 29 basis points on Tuesday after the government’s announced a lower borrowing target for the first half of 2018-19.

The softening of yields is expected to bring relief to banks as chances of booking losses on bond holdings have declined in the fourth quarter ending March. Banks have to make mark-to-market provisions for erosion in bond values. According to bond dealers and treasury executives, yields in the market softened by over 25 basis points, reflecting an immediate impact on investor sentiment. Equilibrium would be reached at a higher level, but was likely to remain