Govt bond yields near three-year high after RBI’s hawkish policy shift | Finance News

Government bond yields hardened after the Reserve Bank of India changed its policy stance to withdrawal of accommodation — which came as a surprise — while raising the policy repo rate by 25 basis points (bps) to 5.5 per cent.

The yield on the benchmark 10-year government bond settled at 7.24 per cent, the highest since December 13, 2023, against the previous close of 7.19 per cent.

In the current financial year, the yield on the benchmark 10-year government bond has hardened by 21 basis points, while since the onset of the US-Iran conflict, the bond yield has hardened by 58 basis points.

“The tone of the policy was hawkish, and now a hike in December is seen as confirmed, which led to the massive selling,” said a dealer at a primary dealership. “There is resistance at 7.25 per cent (yield on the benchmark 10-year government bond),” the person added.

Crude oil prices rose on Wednesday, with Brent futures up about 1.3 per cent to trade above $101 a barrel as supply risks in West Asia, including reports of Houthi strikes on Saudi infrastructure, kept the market on edge. Brent has held above $100 for most of the past month.

Persistent selling by foreign portfolio investors in debt and equity and the depreciation of the rupee, which prompted the RBI to sell dollars in the foreign exchange market, have kept the bond market under pressure. India’s forex reserves fell by a record $18.3 billion in the week ended September 25.