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Benchmark G-sec yields close lower at FY23 end vis-a-vis Dec 2022

Shields banks from adverse impact from bond portfolio

Better rated firms moving to bond mkt, says RBI report

Across the yield curve, G-sec yields hardened at the mid-end of the curve while longer term yields eased on March 15 compared to February 15, 2023

Abhijit Lele Mumbai

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The yield on the 10-year benchmark government security stood at 7.31 per cent at close on the last trading day of the Jan-March quarter -- a tad lower than the level of 7.33 per cent on December 31, 2022 (Q3Fy23).

This has helped banks from facing any adverse impact from bond portfolios which are marked to the market.

Bank treasury executives and analysts said bond yields have been exposed to the impact of global factors like policy rate hikes and inflation trends. Yet yields have moved in a corridor on timely regulatory action in the quarter ended March 2023 (Q4Fy23).

Banks have seen adverse impact on bond portfolio due to MTM action in early part of Fy23 and absorbed losses. So very little effect was expected on the bottom-line due to market volatility, said a head of treasury with a private bank.

Reflecting the impact of the repo rate hike in May 2022, the bond yields shot up in the first quarter ended June 2022 (Q1Fy23). The yield on the 10-year benchmark was at 6.84 per cent at end of March 2022 moved up to 7.45 per cent by end of June 2022 (Q1Fy23). Reserve Bank of India began hiking policy repo rates 40 basis points to 4.40 per cent in May.  

RBI in its March 2023 State of Economy report said the yield on the 10-year benchmark G-sec (7.26% GS 2033) tracked the movement in US treasury yields of corresponding tenor -- the latter having surpassed the four per cent mark again in early March, similar to levels observed in October-November 2022.

Subsequently, the US treasury yields dropped sharply following the unravelling of the crisis in US-based Silicon Valley Bank (SVB) on March 10. The yield on US 10-year treasury slumped nearly 20 bps on March 10 and taking cues from it, the domestic yield on the 10-year benchmark softened closing at 7.34 per cent on March 15.

Across the yield curve, G-sec yields hardened at the mid-end of the curve while longer term yields eased on March 15 compared to February 15, 2023.

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First Published: Mar 31 2023 | 9:04 PM IST

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