After a dovish speech at Jackson Hole by Federal Reserve Chair Jerome Powell, yield on the 10-year benchmark bond fell virtually 3 basis points on Monday on enhanced sentiments. Traders had the appetite for securities, as the Reserve Bank of India’s governor in his current interview also signalled a pro-development focus which offered comfort to the marketplace. Additionally, the firm response at the weekly bond auction and the absence of devolvement in the previous couple of auctions supported the marketplace on Monday.
The 10-year benchmark 6.10%-2031 bond yield ended at 6.2249%, as against 6.2539% close on Friday. “The market was bullish today as there was no negative surprise from the Fed’s Chair and RBI governor’s comment in a recent interview to television stated that there will be no sudden shock or any sudden surprises to the market,” a dealer with a state-owned bank stated.
Market participants stated sentiment enhanced following Powell stated that the reduction in asset purchases programme would not be intended to carry a direct signal concerning the timing of interest price lift-off. The Fed is probably to start cutting the bond purchases prior to the finish of the year if financial progress continued. However, a particular time to reduce the $120 billion a month bond-shopping for programme was not offered. Powell expressed caution about employment and stated that inflation was hovering about Fed’s 2% target.
Meanwhile, the bond marketplace also got comfort from the comments by the RBI governor in a current interview with CNBC. “Throughout the pandemic, the RBI has surprised the market in a positive sense, by announcing measures from time to time and responding to the evolving challenges very proactively. So, throughout the pandemic, there have been very pleasant surprises for the market. We are fully conscious and will not try to make any changes which take the market by surprise… We don’t want to give any sudden shock or any sudden surprises to the markets,” Shaktikanta Das stated.
Additionally, the demand from investors has been seen enhancing as has been evident in the last couple of aucitons. Also, the devolvement in auctions has decreased, the last devolvement has taken location on July 30, although on August 6 the central bank has rejected all bids on 10-year bonds at a weekly bond auction.
Market participants anticipate that the yield benchmark bond to trade in a thin variety ahead of the announcement of Q1 GDP information. “We continue to expect the 10-year paper to remain in the 6.20-6.30% as markets await the 1QFY22 GDP data. We expect the 1QFY22 GDP at 21.7% yoy aided largely by strong favourable base effect,” stated Upasna Bhardwaj, senior vice president, Kotak Mahindra Bank, stated in a report.