G-Sec yields rise on fears of aggressive Fed rate rate hike and rising crude oil price – The Hindu BusinessLine

lipped from: https://www.thehindubusinessline.com/money-and-banking/g-sec-yields-rise-on-fears-of-aggressive-fed-rate-rate-hike-and-rising-crude-oil-price/article65644917.ece

Floating Rate Bond devolves on PDs at the auction

Government securities (G-Secs) prices declined on Friday, tracking US Treasury yields, as the bond market was gripped by fears that the US Fed might go for a 75 basis points rate hike to tame stubborn inflation even as crude oil price moved above $100/ barrel.

Further, out of the four bonds that were auctioned by the Reserve Bank of India (RBI), the floating rate bond (FRB) maturing in 2028 devolved on Primary Dealers (PDs) to the tune of about 74 per cent of the notified amount (of Rs 4,000 crore), with the remaining three bonds sailing through.

Price of the 10-year benchmark G-Sec (coupon rate: 6.54 per cent) closed down 31 paise at ₹94 (previous close: ₹94.31). Yield of this security rose about 5 basis points to close at 7.4319 per cent (7.3835 per cent).

Bond prices and yields are inversely co-related and move in opposite directions.

Auction

While three G-Secs/GS — GS 2027 (coupon rate: 7.38 per cent), GS 2036 (7.54 per cent) and GS 2051 (6.99 per cent) — sailed through at the auction, the FRB 2028 devloved on PDs due to reduced appetite for this paper.

Marzban Irani, CIO-Fixed Income, LIC Mutual Fund, noted that FRB does not have much liquidity in the secondary market. Hence, market players bid at higher yields at the auction.

The Government raised ₹32,000 crore via auction of the four above mentioned G-Secs.

Published on July 15, 2022

government bonds

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