Bond yield spikes as RBI’s purchase disappoints

‘RBI was expected to buy more paper’

April 16, 2021 05:03 am | Updated 05:03 am IST - MUMBAI

NEW DELHI, 22/05/2012: As the rupee crashed past the mark of 55 to the dollar to a new closing low, calls have increased for special foreign exchange bonds to be sold by the government to stem the seemingly inexorable slide in the Indian currency after the limited impact that Reserve Bank of India (RBI) measures have had thus far on propping it up. Photo: V.V. Krishnan

NEW DELHI, 22/05/2012: As the rupee crashed past the mark of 55 to the dollar to a new closing low, calls have increased for special foreign exchange bonds to be sold by the government to stem the seemingly inexorable slide in the Indian currency after the limited impact that Reserve Bank of India (RBI) measures have had thus far on propping it up. Photo: V.V. Krishnan

The benchmark 10-year bond yield elevated on Thursday to its highest level in a week as the outcome of the first tranche of the Reserve Bank of India’s bond-purchase programme disappointed traders while inflation concerns also weighed.

The 10-year bond yield ended at 6.13%, its highest level since April 7, and 12 basis points higher than its previous close.

The Reserve Bank purchased ₹250 billion worth of bonds under G-SAP or government securities acquisition programme, under which it has committed to buying ₹1 trillion worth government paper between April and June to aid the absorption of the Centre’s massive ₹12.06 trillion borrowing in FY22.

“Traders were hoping the RBI would buy more of the 10-year paper,” said a senior trader at a private bank. “It bought only ₹75 billion of that bond versus expectations of nearly double that amount,” the trader added.

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