Bombay: The cost of borrowing for 10-year State Development Loans (SDLs) has fallen sharply by more than 15 basis points since last week following the sharp drop in benchmark government bond yields .
According to data from the Reserve Bank of India (RBI), the 10-year weighted average cost of borrowing for states was 7.65% on August 2, down from 7.80% the previous week. As a result, the spread between the weighted average threshold of 10-year SDLs and G-Sec narrowed to less than 40 basis points, from more than 45 basis points previously.
“The yield in our market has fallen from 7.37% to 7.23% and in recent days, taking a cue from the Fed’s comments with a less hawkish tone and a softening in crude has led to a strong rally in US yields. caused traders to accept investment calls and that allowed yields to fall,” said Ajay Manglunia, MD and Head Institutional Fixed Income at JM Financial.
Since last week, the benchmark 10-year bond yield of 6.54% to 2032 has fallen nearly 20 basis points due to falling US Treasury yields and crude oil prices in the international market. . He fell on expectations of a moderation in the pace of rate hikes in India in the coming monetary policy.
Brent crude oil prices settled below the key psychological mark of $100 a barrel on Tuesday through Indian market hours. While the yield on US Treasuries fell 7 basis points to 2.60% on Monday.
In a poll by IANS, various economists and fund managers expected the Reserve Bank of India’s (RBI) rate-setting committee to raise the repo rate by 25 to 50 basis points at the meeting. August monetary policy.
Market participants expect SDL yields to remain range-bound in the coming days until the policy meeting and movement will be seen following central bank guidance.
“We expect the worst behind and yields likely to be stable now than to continue to rise. As we see that rate hikes will be limited going forward and all of that has been factored in, we expect the 7.15-7.45% band for a few months now,” added Manglunia.