Indian Government Bond Yields Decline on Record Surplus Transfer: FE Team
Are you interested in the latest developments in the Indian government bond market? If so, you’re in the right place! In a recent report by Reuters, it was revealed that Indian government bond yields have been on a decline, with the benchmark 10-year bond yield experiencing its fifth consecutive weekly fall. This trend is attributed to the record surplus transfer by the central bank, which is expected to positively impact the government’s fiscal position.
The benchmark 10-year yield closed at 6.9988 per cent, marking a decrease from its previous close of 6.9919 per cent. Over the past five weeks, the yield has decreased by a total of 23 basis points. This positive sentiment in the bond market has led experts to predict that the 10-year bond yield may further ease to 6.95 per cent in the near future.
The recent approval by the Reserve Bank of India’s board to transfer a record 2.11 trillion rupees ($25.41 billion) as surplus to the government for the fiscal year 2024 has been a significant factor in boosting market confidence. This surplus transfer is expected to strengthen the government’s fiscal position and potentially reduce supply pressure, thereby improving demand-supply dynamics in the bond market.
In response to these developments, the government is considering various strategies to manage its cash flow effectively. This includes the possibility of buying back more bonds and reducing borrowings through Treasury bills. Additionally, there are discussions about lowering both fiscal deficit and market borrowing in the upcoming July budget, following the formation of a new government.
Investors like Axis Mutual Fund are taking advantage of the current market conditions by increasing their exposure to longer-duration government bonds. This strategic move is driven by the anticipation of Indian debt being included in global indexes, as well as favorable macroeconomic fundamentals and demand-supply dynamics.
Overall, the Indian government bond market is experiencing a period of positive momentum, with various factors contributing to the favorable outlook. Stay tuned for more updates on this dynamic market as new developments unfold.
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