SDL yields see minor hardening post monetary policy

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Updated: Aug 12, 2020 12:53 AM

For instance, Madhya Pradesh raised 15-year money at 6.61% this week while it paid 6.54% for a similar tenor paper last week.

Yields on central government securities had hardened post the monetary policy last week. Yields on central government securities had hardened post the monetary policy last week.

Yields on long-tenor state development loans see minor hardening post the monetary policy announcement by the Reserve Bank of India (RBI) as 10-year papers got auctioned in the range of 6.46-6.48% as against the 6.40-6.46% range seen last week. In the same period, the old benchmark yield has risen by 7 basis points.

Tuesday’s auction also saw the yield on 15-year SDL rise marginally. For instance, Madhya Pradesh raised 15-year money at 6.61% this week while it paid 6.54% for a similar tenor paper last week. Furthermore, a 20-year SDL was auctioned for 6.60% this week while a similar tenor paper got auctioned at 6.48% last week. Nine states raised a total of Rs 16,800 crore during Tuesday’s auction against a notified amount of Rs 15,050 crore.

Yields on central government securities had hardened post the monetary policy last week. Dealers had reasoned that although a status quo policy was expected, lack of any measures from the central bank, that could ease the supply pressure of bonds, had disappointed the market.

Siddharth Shah, head of treasury at STCI Primary Dealer said that after the announcement of the monetary policy, the market is not expecting a rate cut any time soon and coupled with the consistent supply of bonds in the market, it is indeed having an impact on the yields.

“We are not seeing the same kind of aggression for SDLs that we saw last time as investors do not seem to be in a hurry to lock in their money at higher yields. The inflation is expected to cool only in the second half of the fiscal year and till then yields are expected to remain at close to current levels in the absence of any policy rate reductions. Till then, it will be a suitable time for investors,” Shah said.

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