The yields on government bonds fell for the second straight day as sentiments enhanced on additional easing of crude oil rates and US Treasury yields. “All positive things across the globe, whether it is fall in US Treasury yields, easing oil prices is reflecting in the yields on bonds since Monday. Along with this, GST compensation given by central government to the states also helped bond yields to fall,” stated Mahendra Kumar Jajoo, chief investment officer, Fixed Income, Mirae Asset Investment Managers (India).
On Tuesday, the yields on bonds ended pretty much 2-3 basis points down. The 5.63%-2026 and 6.64%-2035, which is the most traded in the industry as of now, ended at 5.6350% and 6.7477%, respectively. The new benchmark 10-year bonds ended at 6.1190%, which is practically 1 basis points decrease compared to its preceding close on Monday.
A dealer with a state-owned bank stated that the thin trading activity in the benchmark 10-year gilts will boost after the Friday’s weekly bond auction take spot as it is anticipated that it will get a superior response from investors. “Post-Friday’s weekly bond auction, you can see the new benchmark 10-year yields can come closer to 6.05%, because the positive things are improving sentiments of traders in the market,” Jajoo stated.
The central bank in Friday’s weekly bond auction has announced that it would sell `14,000 crore worth of 6.10%-2031 bonds.
This will be the second auction in this segment following it was firstly auctioned on July 9, exactly where the Reserve Bank of India raised `14,000 crore following setting 6.10% yield on 10-year bond.
While, the Brent crude oil rates continued its fall on Tuesday and had now been trading beneath $70 a barrel due to boost in output of oil provide following settling internal dispute at Opec+ and issues of increasing Delta variant of Covid-19 is placing restrictions in some nations. By the finish of trading hours on Tuesday, Brent crude oil was trading at $68.98 a barrel.
Adding to this, the bond yields also got a assistance due to fall in US Treasury yields, which hit pretty much 5 months low on Monday. The yield on 10-year benchmark bond fell just beneath 1.20%. The fall in US Treasury yields was witnessed due to heavy sell-off in the US stocks, with Dow Jones Industrial Average falling more than 800 points.