The government bond yields rose to a near four-week high on Monday after a large portion of a debt sale had to be picked up by underwriters, signalling poor demand after the surprise hike in the repo rate on Friday.
The 25 basis point hike in the repo rate and a tough anti-inflationary stance from the new central bank governor Raghuram Rajan have queered the pitch for bond dealers. Yields have risen 66 bps in the two trading sessions through Monday. That was reflected in the first auction after the repo rate hike with 40.29 billion rupees worth of bonds out of the R15,000 crore sale devolving on primary dealers. The benchmark 10-year bond yield ended 27 basis points (bps) higher at 8.85%. It rose to 8.90%, its highest since August 28.
The RBI on Friday eased its emergency funding rate by 75 bps to 9.50 percent, but surprised markets with a 25 bps hike in the repo rate to 7.50 percent, citing rising inflationary pressures.