Bond yield falls to 20-month low as US Fed Reserve hints at rate cuts

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Mumbai | Published: June 21, 2019 1:35:20 AM

Bond yields on Thursday fell to their lowest level in the past 20 months as the US Federal Reserve turned dovish and kept doors open for a rate cut as early as next month.

The benchmark sovereign bond—7.26% yielding paper maturing in 2029—fell by 4 basis points (bps) to close at 6.79%.

Bond yields on Thursday fell to their lowest level in the past 20 months as the US Federal Reserve turned dovish and kept doors open for a rate cut as early as next month.

The benchmark sovereign bond—7.26% yielding paper maturing in 2029—fell by 4 basis points (bps) to close at 6.79%. Bond yields have fallen by nearly 20 basis points (bps) since June 1 due to a combination of global and domestic factors. The 10-year US bond yield on Thursday fell to a 27-month low at 1.98%, lowest since November 2016.

Experts believe the fall in the GDP numbers will lead to further liquidity easing through open market operations (OMOs) and rate cuts to boost growth. India’s GDP grew at 5.8% for the January to March period — the lowest in the past several years, government data showed. The RBI conducted OMOs worth Rs 27,500 crore in June so far.

Foreign portfolio investors turned net buyers in June and poured in nearly $1 billion in Indian debt markets on the back of an outflow of $537 million in May, signaling a global positive sentiment towards Indian debt.

Dealers also believe the central bank will want to have surplus liquidity in the coming months as it tries to fix problems with the troubled non-bank financial company (NBFC) sector. The RBI has already infused Rs 25,000 crore through OMOs in May.

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