Benchmark 10-year yield hits two and half month high in illiquid trade – Times of India
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MUMBAI: India’s benchmark 10-year bond yield rose in illiquid trading on Monday as expectations for a fresh 10-year issue rose while an uptick in global crude oil prices also weighed on sentiment.
Yields on most other bonds were largely flat as traders awaited Monday’s auction announcement for the week. The Rs 26,000 crore of debt for sale will include Rs 14,000 crore in 10-year paper, although it is not clear whether this will be in the form of a new issue, or a reopening of the most recent one.
The benchmark 10-year bond yield closed at 6.09%, its highest since April 20 and up 3 basis points on the day. The most-traded 6.64% 2025 paper ended at 6.73%, down 1 basis point on the day.
“The 10-year bond has become totally illiquid. RBI (Reserve Bank of India) will mostly issue a new 10-year this week,” a senior trader at a private bank said, adding that the uptick in oil prices had also hurt.
Oil prices rose on Monday, driven by a disagreement about output policy that led to a third day of talks to try to break an impasse among producers in the Opec+ group.
On Friday, RBI said it would in future sell the benchmark 10-year bond and several other notes using the uniform price-based auction method, in a bid to discourage traders from bidding too far above market yields.
Traders said the RBI had also written to primary dealers and the underwriters of the auctions to set out the limits of an acceptable bid and the maximum commission it would pay to the underwriters.
So far this year, RBI has either fully or partially cancelled – or underwriters to the auctions have had to buy – Rs 1.16 lakh crore worth of bonds, reflecting the RBI’s keenness to keep yields in check.
“The uniform price-based auction will be positive on auction days and will help create better demand in auctions,” said Harish Agarwal, a fixed income trader at First Rand Bank.
After the market close, the RBI said it would buy bonds worth Rs 20,000 crore on July 8 under its government securities acquisition programme 2.0 or its version of the quantitative easing.
Yields on most other bonds were largely flat as traders awaited Monday’s auction announcement for the week. The Rs 26,000 crore of debt for sale will include Rs 14,000 crore in 10-year paper, although it is not clear whether this will be in the form of a new issue, or a reopening of the most recent one.
The benchmark 10-year bond yield closed at 6.09%, its highest since April 20 and up 3 basis points on the day. The most-traded 6.64% 2025 paper ended at 6.73%, down 1 basis point on the day.
“The 10-year bond has become totally illiquid. RBI (Reserve Bank of India) will mostly issue a new 10-year this week,” a senior trader at a private bank said, adding that the uptick in oil prices had also hurt.
Oil prices rose on Monday, driven by a disagreement about output policy that led to a third day of talks to try to break an impasse among producers in the Opec+ group.
On Friday, RBI said it would in future sell the benchmark 10-year bond and several other notes using the uniform price-based auction method, in a bid to discourage traders from bidding too far above market yields.
Traders said the RBI had also written to primary dealers and the underwriters of the auctions to set out the limits of an acceptable bid and the maximum commission it would pay to the underwriters.
So far this year, RBI has either fully or partially cancelled – or underwriters to the auctions have had to buy – Rs 1.16 lakh crore worth of bonds, reflecting the RBI’s keenness to keep yields in check.
“The uniform price-based auction will be positive on auction days and will help create better demand in auctions,” said Harish Agarwal, a fixed income trader at First Rand Bank.
After the market close, the RBI said it would buy bonds worth Rs 20,000 crore on July 8 under its government securities acquisition programme 2.0 or its version of the quantitative easing.
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