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Benchmark bond yield at over 1-year low; here’s what investors may expect

Ashish Pandey
In the local markets, the rupee closed at Rs 69.74 against the dollar, an appreciation of 48 paisa or 0.69%.

The benchmark 10-year bond yield on Monday fell to the lowest level in over a year tracking decline in the crude oil prices and fresh OMO announcement by the RBI. The yield fell to 7.16 per cent, the lowest level since April 9, last year, after closing at 7.23 per cent on Friday, according to the Bloomberg index. The yield hit the day’s high at 7.23 per cent after opening at 7.22 per cent today. The central bank last week announced an OMO to purchase up to Rs 15,000 crore worth of bonds on June 13. The sentiment in the bond markets may remain positive ahead of the June monetary policy, traders say.

The outlook of FIIs and FPIs has become even more stronger after the BJP win, and expectations the crude may remain lower for time is further boosting the market sentiment, technical analyst Milan Vaishnav told Financial Express Online. It is also expected that monetary policy that is slated to come up at June 06 will have a rate cut and other positive fiscal measures going ahead. All this has resulted in buoyant sentiment in the bond market. With the bond prices rising given this buoyancy, the yields have come down and presently trade at a 14-year low , he added.

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Even though the auction amount is lower than in May, but the RBI hasn t said anything about not doing more. They will conduct another round possibly if they see the need for it,” global news agency Reuters reported citing a senior dealer. The benchmark 10-year bond yield was trading at 7.17 per cent, down 0.78 per cent at the time of reporting.