Government securities (G-Secs) yields jumped on Tuesday, with the yield on the 10-year benchmark hardening beyond the crucial 6.50 per cent level, as US treasury yields rose overnight and States’ borrowing for the January-March quarter was revised upwards.
Yield on the benchmark 6.10 per cent G-Sec/GS 2031 spiked about 5 basis points to close at 6.5173 per cent against the previous close at 6.4603 per cent.
Price of this paper declined about 39 paise to close at ₹97.0725 against the previous close of ₹97.4650.
Bond yields and prices are inversely correlated and move in opposite directions.
Overnight, yield on the benchmark 10-year US Treasury note rose 13.7 basis points to 1.637 per cent.
Yield on the 30-year Treasury bond also soared 14.3 basis points to 2.032 per cent. Marzban Irani, CIO-Fixed Income, LIC Mutual Fund, observed that the domestic G-Sec market felt the ripple effect of the overnight rise in US treasury yields, with the market interpreting this to mean that the Fed is on course to up interest rates.
States’ borrowing
Further, upward revision in States’ borrowing programme for the fourth quarter and rise in cut-off yields on State Development Loans of State Governments had an impact on trading in the G-Sec market. Cut-off yield at the auction of State Development Loans of State Governments rose on Tuesday by 8-9 basis points. One basis point is equal to 0.01 per cent.
Meanwhile, the Reserve Bank of India (RBI) has unveiled a market making arrangement under its ‘RBI Retail Direct (RBI-RD) Scheme’, wherein the Primary Dealers (PDs) will be present on the Negotiated Dealing System (NDS)-OM (Ordering Matching) platform (odd-lot and Request for Quotes segments) throughout market hours and respond to buy/ sell requests from Retail Direct Gilt Account Holders (RDGAHs).
The scheme is aimed at promoting retail participation in G-Secs by providing prices/quotes to Retail Direct Gilt (RDG) account holders enabling them to buy/sell securities under the RBI-RD Scheme.