Bond yield rises to 7.44% on higher oil prices, global cues
Yields on the 10-year benchmark bond have increased due to high oil prices. The Reserve Bank of India rejected all bids at the treasury bill auction conducted recently. The government aimed to raise ₹23,000 crores through treasury bill sales but faced significantly higher yield bids. Market analysts indicate a potential 50 basis point hike by the RBI in December.
Mumbai: The 10-year benchmark bond's yield rose 5 basis points to a three-and-a-half year high of 7.44% due to high oil prices, according to CCIL data. This marked the weakest level since March 2023, with the 10-year yield closing at 7.44%, up from its previous close of 7.39%. The Reserve Bank of India (RBI) rejected all bids at the treasury bill auction on Wednesday as short term yields climbed, with the government aiming to raise ₹23,000 crores through the sale of 91-day, 182-day and 364-day treasury bills.
Traders suggested that the cutoff yields may have exceeded the central bank's comfort level. The rise in oil prices, global yield pressure, Foreign Institutional Investor (FII) selling, and global fundamentals have collectively played a role in the current situation, with the market signaling a potential 50 basis point hike in December.
Anshul Chandak, head of treasury at RBL Bank, noted that the RBI's decision in the T-bill auction today further corroborates this view. High oil prices have also raised inflation concerns, negatively impacting India's local currency and bonds as the country is a net importer of the commodity. Banks participated in the T-bill auction, placing bids at yields at least 15 basis points higher than the previous week's auction, as per a trader from a large state-run bank.
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