Bond yields rose 1-3 basis points on Wednesday as oil costs gained. The sell-off in bonds took location as major dealers had to lighten their positions ahead of the weekly bond auction on Friday. Dealers stated traders had reduce their extended positions ahead of the release of the outcome of Federal Reserve’s meeting.
The yield on new 10-year benchmark 6.10%-2031 bond ended at 6.1879%, which is nearly 1 basis point greater than its prior close. Yields on most traded bonds 5.63%-2026 and 6.64%-2035 ended at 5.7062% and 6.8031%, respectively.
“The rise in bond yields is not just over one factor, but a combination of all. The market is focusing on guidance by the RBI in the policy and what will happen at the next auction after heavy devolvement in the previous auction on PDs,” stated Lakshmi Iyer, CIO-fixed revenue and head-items at Kotak Mahindra Asset Management Company.
The yields on most traded bonds, 5.63%-2026 and 6.64%-2035, have risen on provide issues. Dealers are of the view that traders have taken positions ahead of the weekly bond auction on Friday. The Reserve Bank of India (RBI) on Monday announced weekly bond auction worth Rs 32,000 crore, of which Rs 11,000-crore sale will be of 5.63%-2026 and Rs 10,000 crore of 6.64%-2035 bonds. Similarly, the RBI will sell bonds worth Rs 4,000 crore and Rs 7,000 crore in the segment of GoI FRB 2033 and 6.67%-2050, respectively.
Brent crude oil costs had been trading greater and breached $75 a barrel mark immediately after the reports on tightening provide of US crude. Crude oil costs also rose due to delays in US-Iran nuclear talks. By the closing time of the Indian markets, the Brent crude oil was trading at just above $75 a barrel, which is up nearly $1 from morning trade.
Traders also await the outcome of the Federal Reserve meeting as it is anticipated that the Fed will taper its massive asset purchases programme due to increasing Covid-19 delta variant infections. The Fed buys $120 billion in government-backed bonds each and every month – $80 billion in treasury debt and $40 billion in mortgage-backed securities.
But, some dealers with state-owned banks stated the Federal Open Market Committee meeting is not a concern for the markets proper now, and that domestic elements are playing an essential part. “Right now, domestic factors are more significant than global factors as FOMC is largely known by the market,” Iyer stated.