CRR cut pushes yields to 6-week high

“After Monday's announcements by the finance minister on fiscal consolidation, everyone in the market expected a rate cut. I think the market got a bit too long and so there has been a cutback,” said Hitendra Dave, head of global markets India at HSBC Bank.

RBI kept its repo rate unchanged at 8%, but slashed CRR, which is the portion of deposits that banks have to keep with the RBI, to 4.25%.

Dealers said after the announcement of a fiscal consolidation roadmap by finance minister P Chidambaram on Monday, the bond market was expecting RBI to take a cue and cut the repo rate. “Analysts were also expecting both CRR and a repo rate cut and it is a big dissapointment for them,” said the chief dealer at a large public sector bank.

The 10-year benchmark 8.15%, 2022 bond yield rose to 8.18% after the policy announcement from 8.11% before the policy was released. Bond traders had build positions in early trade ahead of the policy expecting a rate cut on back of the finance minister's fiscal consolidation plan.

Chidambaram on Monday gave a five-year roadmap for fiscal consolidation and said the government would endeavour to contain the deficit for 2012-13 to 5.3% of gross domestic product.

“The 10-year bond yield will

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