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Benchmark bond yields plunged 17 basis points Tuesday in India, mirroring gains in US Treasury yields. A sharp drop in yields should help lower sovereign funding costs amid an increase in consumer prices.

The local gauge closed at 7.30% versus 7.47% Monday. When bond yields fall, prices rise.

“A combination of factors contributed to the drop in benchmark bond yields on Tuesday,” said Naveen Singh, head of trading,

PD.



A drop in US treasury yields and lower crude prices led to a steep rise in Gsec prices, Singh said.

The 10-year US bonds yielded 2.99%, with yields plunging about 21 basis points since Monday. Brent crude oil, too, fell nearly three-fourth of a percentage point.

A group of five state governments Tuesday raised Rs 10,700 crore via the sale of bonds in the primary market, known as state development loans (SDLs). The cut-off yields, below which none could bid, came at levels lower than average market expectations, reflecting a drop in the benchmark yield.

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