Benchmark bond yield rises 9 basis bps post RBI hikes repo rate

The yield on benchmark government bond yields rose sharply by 9 basis points in the morning trade after the Reserve Bank of India (RBI) announced an increase of the repo rate by 50 basis points.

The yield on 6.54 per cent-2032 benchmark government bonds were trading at 7.2434 per cent by 11.50 a.m., as compared to 7.16 per cent close on Thursday.

“While the RBI has not changed its GDP/inflation projections or its stance, it increased repo rates by 50 bps as CPI has been above the RBI comfort level for months. The RBI also wants to make sure that inflationary expectations are not entrenched. Yields went up by 15 bps on the 10 year segment. It is difficult to predict, especially about the future. We at TRUST MF, do not feel that it is the end of rate hiking cycle,” said Sandeep  Bagla, CEO, Trust Mutual Funds.

The RBI in its bi-monthly monetary policy has increased repo rate by 50 basis points to 5.40 per cent to contain inflation. Consequently, the standing deposit facility rate adjusted to 5.25 per cent and marginal standing facility and the bank rate adjusted to 5.65 per cent.

The central bank has retained GDP and inflation forecasts at 7.2 per cent and 6.7 per cent, respectively, for the current financial year.

 

“With inflation expected to remain above the upper threshold in Q2 and Q3, the MPC stressed that sustained high inflation could destabilise inflation expectations and harm growth in the medium term. The MPC, therefore, judged that further calibrated withdrawal of monetary accommodation is warranted to keep inflation expectations anchored and contain the second-round effects,” RBI governor Shaktikanta Das said.

Today, the RBI is scheduled to auction 4 government securities worth Rs 33,000 crore. The securities which are going to auction include 6.69 per cent-2024, 7.10 per cent-2029, 6.54 per cent-2032, and 6.95 per cent-2061.

Whereas, the result of underwriting auction for these bonds showed that the commission cut-off rate for 6.69 per cent-2024 is set at 80 paise, 7.10 per cent-2029 at 38 paisa, 6.54 per cent-2032 at 86 paise, and 1.44 for 6.95 per cent-2061.

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