Yield of the 10-year benchmark Government security (G-Sec) rose to an almost 3-year high intraday even as the debt market continued to reel under the hawkish tilt of the monetary policy. However, yield of this paper came off to close lower.
The yield (coupon rate: 6.54 per cent) rose to 7.1964 per cent intraday, but closed at 7.1486 per cent (previous close: 7.119 per cent). In price terms, this paper closed 20 paise lower at ₹95.76 (₹95.96).
“The hawkish FOMC (Federal Open Market Committee), followed by a bold reversal in the MPC’s (Monetary Policy Committee) shift in policy guidance in favour of inflation over growth, completely jolted the bond markets. While some relief through the increase in HTM (Held To Maturity) limit to 23 per cent till March 2023 was provided by the RBI, the conviction for explicit support to the bond markets was less visible, thereby unnerving the markets,” said Kotak Mahindra Bank in a report.
Going ahead, heavy supply burden, absence of explicit RBI support and an early reversal in policy stance are expected to keep the bond markets jittery, it added.
The bank also expects the new range of the benchmark 10-year yield to now shift to 7-7.30 per cent range in the near term.