Higher sovereign bond yields drive up overall borrowing costs in the economy as government securities are the benchmarks used by corporate entities to determine the pricing of their debt issuances.
The government bond market on Thursday witnessed its worst selloff in 10 months, with yield on the 10-year benchmark government bond shooting up 7 basis to close at 7.24%. Thursday's rise in yields was the largest single-day jump since November 2022.
Best MF to invest
Looking for the best mutual funds to invest? Here are our recommendations.
Bond prices and yields move inversely. Thursday's closing level marks the highest for a 10-year bond yield since April.
Late Wednesday, the Reserve Bank of India said that with the government of Maharashtra having declared September 29 as a public holiday under the Negotiable Instruments Act, the public holiday which was declared on September 28 stands cancelled. The central bank said that it had now been decided to keep the bond market open on September 29 too as against an earlier scheduled holiday.
Consequently, a primary auction of government bonds worth ₹39,000 crore was brought forward to Thursday, with bond supply hitting the market sooner than expected. Usually, primary government bond auctions take place on Fridays.
"Part of the selloff is because the auction got preponed. It wasn't so much the holiday change but largely driven by higher crude oil prices and the fact that US Treasury yields are up and there is a gamut of US Fed speakers who are scheduled to talk over the next few days which is weighing on the market," said Rajeev Pawar, head of treasury at Ujjivan Small Finance Bank.
"I think it's temporary - the 10-year yield at 7.25% should find some support," Pawar said, providing an estimate of 7.15-7.25% for the 10-year bond yield in coming days, which implies room for the benchmark yield to soften.
After Indian market hours, US Fed Chair Jerome Powell is scheduled to speak at a Town Hall on Thursday. Domestic traders await any cues on future interest rate hikes in the US, especially after the Fed earlier this month signalled more monetary tightening in the world's largest economy. US 10-year bond yields climbed to a 16-year high on Wednesday, surging past the 4.60% mark.
Higher US bond yields reduce the appeal of fixed-income assets in emerging markets such as India, leading to capital outflows and potentially causing the local currency to weaken versus the dollar.
- Front Page
- Pure Politics
- Brands & Companies
- Learn more about our print editionMore
- Vedanta to Demerge into Six Listed Companies
Resources conglomerate Vedanta, which faces bond redemptions exceeding $3 billion over the next 18 months at its UK-based holding company, Friday said it would demerge into six listed companies to undergird the valuations of its revenue streams as diverse as mining, energy, and non-ferrous metals.Jewellery Chains Put their Hallmark on Small Towns
Latha Radhakrishnan used to travel to Coimbatore city to buy gold jewellery from Tanishq's store there, but she now has the option to buy it closer home, as the Titan co-owned chain has opened an outlet at Pollachi.Sony-Zee Show Runs Into Overtime; Legal Glitches Behind Delay: Experts
Sony Group Corp Friday said that there would be a delay of several months in the merger of its local media unit Sony Pictures Networks India with Zee Entertainment Enterprises (ZEEL), while adding that both parties would pursue the processes necessary to close the deal that aims to create one of the biggest media companies in Asia’s third-largest economy.
Read More News on
Download The Economic Times News App to get Daily Market Updates & Live Business News.
ETPrime stories of the day
2 mins read
5 mins read
6 mins read