Comments
The bloodbath in the Government Securities (G-Secs/GS) market continued a day after the Union Budget, with G-Sec yields further heading north, closing in on the 7 per cent mark.
Players in the debt market are disappointed by the possibility of high G-Sec supply hitting the market. The Government has pencilled a large gross market borrowing of ₹14.95 lakh crore in FY2023 against FY2022’s revised estimate of about ₹10.47 lakh crore.
Yield of the erstwhile 10-year G-Sec (coupon rate: 6.10 per cent) rose about 7 basis points to close at 6.9130 per cent (previous close: 6.8458 per cent). Price of this security fell about 45 paise to close at ₹94.425 (₹94.87).
Yield of the newly issued 10-year G-Sec (coupon rate: 6.54 per cent) jumped about 5 basis points to close at 6.8805 per cent (6.8279 per cent). Price of this security fell 37 paise to close at ₹97.57 (₹97.94).
Dwijendra Srivastava, CIO-Debt, Sundaram MF, observed that the Reserve Bank of India’s statement that “G-sec yield curve may be viewed as a public good” will be tested to the hilt as the macro setting is quite challenging for India at this point of time in the backdrop of US Fed looking to raise rates.
He emphasised that rising yields is the market players’ way to convey to the Reserve Bank of India (RBI) that they want proper communication to the effect that it will step in and handhold.
“Their (RBI) intervention is required, particularly in a rising interest rate environment,” Srivastava said.
Yield of the widely traded erstwhile 10-year G-Sec has jumped 23 basis points since the announcement of the Budget, with its price declining ₹1.55.
HSBC, in a report, opined that it will be difficult for the market to absorb such massive supply (of G-Secs) in the absence of support from the RBI and a time when banks may not have as much appetite for holding government bonds given normalising liquidity conditions and the improving economy.
“Therefore, we raise our forecasts for 10-year Gsec yields to 7.5 per cent (previous: 6.8 per cent) by 2Q (2nd quarter) 2022 and 7.8 per cent (previous: 6.8 per cent) by the end of 4Q 2022,” it said.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.