Current bond yield level not justified: Garg

‘Will return to normal level’

The current level of bond yields are not supported by fundamentals and are expected to return to normal levels, Subash Chandra Garg, Economic Affairs Secretary, said on Friday.

Speaking to the media, Mr. Garg said, “Any increase in yields is a matter of concern, but you would have seen there is some moderation in the yields.”

Rising crude prices

The yield on the 10-year government bond went past 8% recently mainly on account of concerns about rising crude oil which would have an adverse impact on inflation since the country imports 80% of its crude oil requirement.

“The yields today are possibly not justified on fundamentals and therefore, as things get mature and stablise, they will come back to normal,” said Mr. Garg.

The RBI had raised interest rates in June after a gap of four and half years due to inflation concerns. Bond yields had fallen after they hit 8% earlier this month. On Friday, the yields on 10-year benchmark government bond closed at 7.82%.

Mr. Garg also said that the government’s borrowing programme was evenly spread and there was no back-loading.

The gross borrowing for the current financial year is ₹6.06 lakh crore.

In the April-September period of this fiscal, government has planned to borrow ₹2.88 lakh crore, lower than ₹3.72 lakh crore it had borrowed in the same period in FY18.