Government securities (G-Secs) rallied on Monday, tracking US treasury movement, on expectations that the US Fed may turn less aggressive on rate hikes.

Price of the widely traded G-Sec (maturing in 2032 and carrying 7.26 per cent coupon) rose about 50 paise to close at ₹99.3350 (previous close: ₹98.84). Yield of this paper softened about 7 basis points to close at 7.3579 per cent (7.4321 per cent).

RK Gurumurthy, Head-Treasury, Dhanlaxmi Bank, said G-Sec yields mirrored US markets with inflation worries moving backstage and expectations of a possible Fed pause dominating trader sentiments. A flight to safety run often ends up with investors buying short dated government bonds, he added.

“Post the SVB debacle, the dollar index moved lower below 104. US Treasury yields dropped sharply with the 2-year note almost 100 basis lower from last week’s intraday high of 5.05 per cent. The probability of Fed hiking rates by 50 bps next week has significantly diminished with market-implied probability reading below 50 per cent even for a 25 bps hike,” Gurumurthy said.

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