Premature tightening: No reason for bond yields to stay at elevated levels

But waiting for the market to self-correct could be costly for the economy

Neelkanth Mishra

At just about the same time that India’s economic growth has started to pick up from the recent trough, monetary conditions have begun to tighten. For those dependent on the bond market, conditions have already tightened sharply, with interest rates up by nearly a per cent and a half. They are no longer a minority: in the last financial year, nearly five trillion of the seven trillion rupees of incremental credit was funded outside the banking system. Even bank funded entities may now expect higher rates, with the bellwether State Bank of India (SBI) now raising lending rates by twenty basis points.
Bond yields have risen so sharply that an observer only looking at bond yields would assume the economy was in crisis. The move in the last six months has been one of the worst in recent memory, and reminiscent of the “crisis quarters” in 2013, 2008 and 2009.
“Explanations” for this move range from attempts to re
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of or the Business Standard newspaper

Also Read

Statsguru: The anatomy of India's GDP growth

MPC's lowered growth estimate may be a tall hill to climb as well

Growth outlook for remaining part of FY18 is not without risks

Wanted: A vibrant corporate bond market

MPC minutes: Six-member panel express discomfort over rising inflation

Trade war is a lose-lose situation, can push entire world into recession

Macro to micro transition: 2018 is going to be a difficult year for markets

Economists vs scientists on long-term growth

From women posing as men to rooftop aircraft, wonders in India never cease

Growth recovery visible; sentiment poor

First Published: Mar 07 2018 | 5:57 AM IST

Explore News

To read the full story, subscribe to BS Premium now, at just Rs 249/ month.

Key stories on are available only to BS Premium subscribers. Already a BS Premium subscriber?LOGIN NOW

Register to