The yields on the 10-year bond closed at 6.51 per cent, after falling to 6.54 per cent in the intra-day trade. “If the plan is scrapped, then there is no reason for the bond yields
to remain low. The dollars are not coming, and the rupee is not strengthening to that extent. And if the overseas plan is cancelled altogether, the bond supply is coming back to the domestic market,” said Devendra Dash, head of asset liability management at AU Small Finance Bank.
The bond yields have fallen about 100 bps since January, reacting to 75-bp policy rate cuts by the RBI since February. The market expects the RBI to cut rates by another 25 bps in the August policy.