Money & Banking

G-Sec yields continue to rise

Our Bureau Mumbai | Updated on February 26, 2021

The Government Securities (G-Sec) market continued to be spooked by a host of factors, including oversupply of G-Secs, rising US Treasury yields and oil prices.

Yield on the widely-traded 10-year benchmark G-Sec (carrying a coupon rate of 5.85 per cent) rose about 5 basis points to about 6.2290 per cent, with its price declining about 33 paise to ₹97.25 over the previous close.

Yield on the earlier 10-year benchmark G-Sec (carrying a coupon rate of 5.77 per cent) jumped about 8 basis points to about 6.3162 per cent, with its price dropping about 54 paise to ₹96.16 over the previous close.

The discomfort of the market players with the yields manifested in the form of them seeking higher yields at the auction of two G-Secs.

So, the Reserve Bank of India devolved about 66 per cent of the notified amount of ₹4,000 crore in the case of the three-year G-Sec on primary dealers (PDs). It also devolved about 19 per cent of the notified amount of ₹11,000 crore in the case of the 15-year G-Sec.

In the case of the auction of two other G-Secs, the Government exercised greenshoe option on the 13-year floating rate bond, mopping up ₹5,450 crore against the notified amount of ₹4,000 crore, and accepted partial bids aggregating ₹2,503.522 crore against the notified amount of ₹5,000 crore for the 30-year G-Sec.

Marzban Irani, CIO-Fixed Income, LIC Mutual Fund, said: “We will be struggling with inflation as we go ahead because of increase in commodity prices. Additional liquidity infusion is leading to more inflation.

“...In the US also, yields are rising continuously. Across the world, central banks are saying “don’t worry, we will infuse liquidity, this and that”. But markets are not ready to believe. Markets are in correction mode only.”

Published on February 26, 2021

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