Bond yields fall on rate status quo hope; Rs 110 bn bond auction on Friday

Bond prices rose from their Wednesday level, reacting to the fact the Reserve Bank might pause rates for long.


As prices rise, bond yields fall. The yields on the 10-year bond closed at 7.47 per cent on Thursday, down from its previous close of 7.53 per cent.


The government will auction bonds worth Rs 110 billion on Friday, of which Rs 30 billion will be through an existing floating rate bonds, being re-issued after many years. When a floating rate bond is issued, the duration risk of the bond is curtailed, thereby boosting demand.

“Crude oil prices are showing signs of moderation. After Friday, there will be no auction left. Since supply is curbed and rate hike expectations are muted at the moment, bond yields will fall,” a senior bond dealer said. However, bond dealers also said the fall in yields would be temporary till fresh issuance of paper started in April.