Yields on Government securities are likely to fall further in the coming weeks due to the announcement of liquidity-easing measures by the RBI in mid-term policy review last Friday, treasury officials say.

“Yields on Government bonds will ease in the coming weeks as there was a mention (in mid-term review) of conducting open market operations (OMOs) by the RBI in the case of liquidity strain. So, as liquidity situation is taken care of, the yields should fall,” the IDBI Bank Treasury Head, Mr N.S. Venkatesh, told PTI.

On Friday, the yield on a 10-year benchmark government bond closed at 8.37 per cent, 16 basis points lower than a week before.

On a possible yield on a 10-year G-Secs yield next week, Mr Venkatesh said it may move down to 8.30 per cent. Open market operation (OMO) is conducted by the RBI to infuse liquidity in the system through buying back of government bonds.

In the last three weeks, the central bank has already infused around Rs 24,500 crore into the system through OMOs, and is likely to infuse more in the near future.

Other treasury officials said though yields will ease, they will not ease to a great extent as the market has already factored in the positives of the monetary policy announcement.

“Definitely it will ease further but I don’t expect yields easing to a larger extent. Rather, it may hover around 8.34-8.35 level on 10 year G-sec,” said Mr P. Rajaram Karanth, GM (Treasury), Corporation bank.

He also said the Government’s borrowing programme will largely determine the yields on government bonds.

Recently, the Government said it would borrow an additional Rs 53,000 crore from the market over and above Rs 4.17 lakh crore estimated earlier, which will translate into higher flow of government securities for subscription during this period.

Related Topics