After falling for two days in a row, the yields on government bonds rose sharply on Thursday amid profit booking by traders. Yields rose 3-5 basis points following falling more than 5 basis points in the last two trading sessions. The most traded bond 5.63%-2026 ended at 5.6814%, practically 5 basis points greater than its prior close on Tuesday. The 6.64%-2035 bond ended at 6.7770%, compared to 6.7477% in the prior trading session.
“Bonds have shown a typical response from what the global market has shown like US yields moved up almost 10 basis points and oil prices have also risen that led to profit booking or sell-off in the market on Thursday,” mentioned Mahendra Kumar Jajoo, chief investment officer, fixed revenue, Mirae Asset Investment Managers (India).
On Wednesday, yields on the 10-year US Treasury rose to 1.3%, following falling to 5-month low. This was simply because the increasing Covid-19 infections due to the Delta variant has dampened the sentiments and clouded prospects of an financial recovery.
Brent crude oil costs in the international marketplace have inched up regardless of the rise in oil Inventories from the US and weak demand due to increasing infections. Market participants mentioned the rise in oil costs is standard trading volatility as it was anticipated to go up a bit following sharply falling in the previous couple of days.
By the finish of trading session on Thursday, Brent crude was trading at $72.65 a barrel, up 42 cents or .58% for contract maturing in September 2021. Since the start off of this week, oil costs have been falling following a deal by OPEC+ to boost provide from August.
Dealers with state-owned banks are expecting the yield on 10-year benchmark to rise marginally on Friday due to provide issues from weekly bond auction.
The central bank’s weekly bond auction on Friday will raise Rs 14,000 crore by way of sale of 10-year bonds. Another Rs 3,000 crore and Rs 9,000 crore will be raised by promoting 4.26%-2023 and 6.76%-2061 bonds, respectively.
“The 10-year bond yield is going to remain range bound after the weekly bond auction, as for now we are expecting status quo in the policy,” mentioned Lakshmi Iyer, CIO-fixed revenue and head-merchandise at Kotak Mahindra Asset Management Co.
The G-SAP 2. auction on Thursday got completely subscribed, with quantity presented by traders touched practically Rs 50,000 crore. The central bank bought Rs 7,225 crore of 6.97%-2026 bonds at reduce-off value of Rs 104.52 or 5.9312% yield and Rs 7,384 crore of 6.79%-2029 bonds at reduce-off value of Rs 101.85 or 6.5003% yield.
It has also bought 6.18%-2024 bonds worth Rs 2,523 crore and 8.60%-2028 bonds worth Rs 2,868 crore.
Dealers with state-owned banks anticipate the announcement of one more G-SAP 2. auction will take place in the next week.